Category: Economics

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Economics

Upgrading Iraq’s Digital Infrastructure to Lay Foundations for Sustainable Economic Growth

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.

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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
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.

Author

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.

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Economics

Kurdistan’s Food-Security Challenges

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.

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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
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.

Author

Basically, food security has several aspects: 

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. 

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Economics

The COVID-19 Crises Go beyond Iraq’s Economic and Health Sectors

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.

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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
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.

Author

The New Financial Picture

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. 

Categories
Economics

Foreign Labor Pressures the Already Exhausted Kurdistan’s Economy

Since 2014, around 80 thousand foreign workers have entered Kurdistan Region of Iraq (KRI). The region’s poor labor regulations have created multiple problems for its economy as well as the foreign workers, who have faced various types of abuses. Meanwhile, local labors barely survive the region’s crashed economy due to the recent oil price down, ISIS’ war, and financial instability.

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A number of the Iranian Kurds who have come to Sulaymaniyah were sitting under the shade of a tree closed to Sulaymanya’s Grand Mosque, usual place for casual labors to meet their employers. Hussein Qadri, 18 years old from Jiwanro (small sown in Iranian Kirmanshah Province) was waiting to be hired as causal labor to make his life in the day. He told ICPAR, “In Iran, the daily wage is 80 to 90 thousand Toman which is worth a kilo of beef, and we barely could make enough to survive. However, working a day here is worth 250 thousand Iranian Toman as daily payment of labors is about 25,000 IQD. To work here we have to pay the entry fees and accommodation which is 3,000 IQD per a night. I think we have benefited the economy here by lowering the cost of labor.” 

Aras Osman
Aras Osman

is journalist covers political and economic events in Iraq.

Author

Before the Iranian labors enter the KRI’s market, Iraqi workers used to do the same job at 35,000 IQD per day; therefore, as Qadri stated, “Iraqi workers are not happy with us while we work for less money.” 
The Iranians usually stay for short period of time to provide for their families, and they will go back after making 3 to 4 hundred dollars, which is enough to get their families satisfied in the whole month because of the Iranian depreciated currency. 
On November 5, 2018, the U.S. re-imposed economic sanctions on Iran. The sanctions, had been lifted or waived under the Iranian Nuclear Deal, are seen the toughest sanctions the Iranian Regime has faced. They target Iran’s energy, shipping, and shipbuilding sectors, which are crucial for the country’s economy. They have lowered Iranian oil exports from 2.5 million barrel per day (bpd) to almost 100 thousand bpd and dramatically depreciated Iranian currency. “If Iranian economy is good or not, we are poor labor and only we can pray that our lives do not get worse.” Qadri elaborated while talking about his life-conditions back in Iran. 
According to the Article 23 of the KRI’s Labor Law and 2015 regulation No 2, any foreign worker enters the region has to pass on his/her skills and experiences to two local workers. Data provided by the Social Affair Committee of the KRG Parliament, shows that around 10 thousand workers entered KRI in 2015, but the region’s economic crisis and halt in the public projects lowered this number to almost 3,500 in 2018. Out of this number, only 427 were skilled workers, and the rest were low skilled or un skilled workers. From 2014, 78.5 thousand workers entered the KRI, and 50 thousand of them still live in the region.
During the interviews, the workers talking very cautiously as they have left families in Iran and did not want to make any political point that might get them in trouble. They also avoided talking about the implications of the current Iranian economic crisis, fearing from prosecution once they will go back. 
Another worker from Marivan (A town on the Iran-Iraq border) talked on condition of anonymity fearing from issues back in his home-country, said “It has been four days since I came here. I used to work as a truck driver and make more than 100,000 Iranian Rial (47.6USD) per day. But the situation is so bad now if I do my best I still can’t make 20,000 Iranian Rial (9.5 USD). I had to sell my car for 20 million while I paid 60 million originally to buy it.” 
Every morning, around 90 Iranian workers gather in the same spot, and after finishing their works, they return back to the same spot to socialize. While staying there, two other Iranian workers, one from Sina (Sanandaj) and the other one from Marivan returned from their works. It has been four months, they moved to Sulaymaniyah fleeing the Iran’s crashed economy. Another worker, called Shaaban, told ICPAR, “I was working as a casual labor in Iran, but it got so bad I could not provide anything to my family. But here, the market is good. People look for Iranian labor because it is cheaper. We have a very harsh condition and I have heard story that an Iranian worker killed his friend to take his labor wage. I am engaged, but I can’t get married. Coming here was to make some money to my wedding party.”
Nariman Qadri, another Iranian worker, has been in Sulaymaniyah for the last three years and worked in construction, said, “Here I will do any work just to survive and support my family. We are facing a lot of problems because the employers sometimes delay our payments. Sometimes, we make 25,000 IQD but it is not all the time. Some days, I do not even make 10,000 IQD (8.3 USD). But some days, I could get lucky and make 50,000 IQD (42 USD), so it is not a stable income.” 
Even though, these foreign labors are making much more compare to their peers back in their home country, but it is very hard for them to save and support their families while the job market in Iraq is not that stable. They also have to spend most of what they are making on living cost; food and accommodation. The new regulations for renewing their work-visa in the KRG cost them 2.2 million Irnaian Rials (66 USD) in the first month, 3.2 million Iranian Rial (96USD) in the second month and 4.2million Iranian Rial (126 USD) from the third month and following. While residency fees are lower in the other parts of Iraq, the workers still prefer staying in the KRI. 

Competing for Limited Labor Opportunities

 Competing for limited labor opportunities, the Iranian workers have created problems to locals. The first issue here is reducing wages. They are entering an economy that yet slowly recovers recent financial and economic crises. Employers know about the needy Iranian labors, and there have been many cases where employers did not pay workers or did not fulfill their agreement fully as Badria Esmael, rapporteur of Social Affair Committee in the KRI’s parliament, revealed. 
Lack of coordination between the Ministry of Interior Affairs and Ministry of Social Affairs to regulate the labor market is one of the key problems. Most of the workers entering the KRI through the Ministry of Interior Affairs with tourist visas, but latter they start looking for jobs and then overstaying. Abdul Majid Salah, general director at the Ministry of Social Affairs working in Sulaymaniyah, told ICPAR, “There should be more coordination between the two ministries. But allowing new workers to enter the market should be left for us in order to make sure that local labor force is not harmed. Also, there should be a time limit in which those workers can stay. After finishing their time period, they should leave back to their countries. There have been Bangladeshi labors working in the KRI for 10 years. They negatively impacted local labor force as they accept lower payments and work more than one jobs.”
Salah believed that allowing workers to enter the market should be based on local needs and demand for labors. After entering, they should be totally integrated within the local legal system, so they would not be abused while working here.  
He elaborated, “We see a trend that the Ministry of Interior Affairs tends to be worried about collecting fees from foreign workers. It has allowed lawyers to issue documents that facilitate importing foreign labors for a fee which in many cases leads to overcharging the workers up to 1 million IDQ [838 usd]. This is overstepping and we are planning to change it, but we have not received any positive responses.”
The foreign workers with the current arrangements could be easily abused and even in some cases dragged to human trafficking. Gulstan Saed, member of Kurdistan Parliament’s Social Affair Committee, stated. Saed, who closely works with labor organizations, confirmed that the foreign workers face abuses in many cases. They lose control over their passports which is against basic human rights. The Social Affair Committee is working to draft a legislation project that obliges the Kurdistan Regional Government to follow Iraqi Labor Law to protect labors’ rights. 
Saed stated, “There is a growing frustration within local workers about the constant flow of the foreign labor into the market as they already have difficulty finding jobs.”
The issue of the foreign labor in the KRG has not been arranged and not fully studied. Till now, the Ministry of Social Affairs does not have a clear statistical data about the number and locations of the foreign labors in the region. Kwestan Mohammed, the region’s labor minister, stated that her ministry has started building a database for all foreign and local labors who work in the KRI. The current situation has caused a lot of problems for other governmental offices. 
The crime rate within the desperate workers is much higher. This has led to horrifying stories according to security sources. In many cases, workers have been robbed by their peers. In few cases, workers killed their friends just for little money.
According to Sarkawt Ahmed, spokesperson of the Sulaymaniyah Police, the labor open border policy has posed many problems to law enforcement institutions in the region. He said, “Many foreigners even do not register their names with any government offices and later cause lots of problems. They make troubles and disturb peace in many places. Also, they have no money to rent a place which has caused a homelessness issue in the region. In some cases, they start begging on the streets. They have to come in fully checked and documented.” 
As Iraqi economy becomes more stable, more workers, especially Iranians, will enter the country; however, the current situation is hard for everyone including government. This needs a greater coordination with public offices and with local labor force to ensure that the market is not oversupplied with labor and the local workers are not harmed. However, this may need to reshape the whole approach that is used for importing labors. As the pressure from local communities rises more, the government and the legislative branch sooner or later need to address this issue. 

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Economics

Wildfire Cost Iraqi Farmers $542 Million

Increased rainfall and the wettest winter in decades, made Iraqi farmers wait for great harvest this year, but the hope of many of them burned with their harvest. Fire incidents became the most frequently reported events in Iraqi media across May and June of 2019, the harvesting season in Iraq. The great number of the fire incidents raised concerns about Iraq’s agriculture sector and food security since $542 worth of wheat and barley farms in 16 provinces of Iraq was smoked into the sky. 

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The reported fire incidents destroyed at least 62,000 acres of wheat and barley farms across the country, but the biggest portion of the incidents occurred in the Disputed Areas located between Federal Government of Iraq (FGI) and the Kurdistan Region of Iraq (KRI). The economic and environmental damages of the wildfire is too complicated to be measured since the Iraq’s formal institutions have not announced any final statistical information on all the incidents.

The latest statistics issued by the Directorate of Civil Defense in Iraq, shows that 329 separate fire incidents destroyed wheat and barley fields between May 8th and June 29th in 12 provinces; Nineveh, Salah Adin, Kirkuk, Diyala, Baghdad, Babylon, Maysan, Wasit, Qadisiyah, Muthanna, Anbar, and Najaf. In addition, local Kurdish media also reported dozens of major fire incidents in Erbil, Sulaymaniyah, Halabja, and Dohuk.

Hamed al-Jboory & Diyar Barzanji
Hamed al-Jboory & Diyar Barzanji

Hamed Al-Jboory is research fellow at ICPAR and covers armed groups’ conflicts in Iraqi provinces of Anabr, Slahadin, and Kirkuk. Diyar Barzanji is research fellow at ICPAR, and his research focus is on Iraqi politics and internal dynamics.

Author

No study has been conducted to monetize the environmental damages of the fire accidents. A basic ICPAR calculation for this report shows that the fire incidents cost Iraqi farmers around 645,951,000,000IQD (about $542,689,872). According to the following calculation, average productivity of 1 acre of Iraqi wheat and barley crop-fields in 2019 is about 22.3 tones. So the lost product of 49,000 acres of wheat farms is estimated to be 1,092,700 tons and 13,000 acres of barley farms 289,900 tons. Iraq’s Ministry of Trade has fixed prices for three types of wheat and barley based on their qualities, and also there are market prices (usually cheaper than the government prices) vary based on provinces and regions. The estimated lost products multiplied by government prices of type 2 quality wheat and barley has been shown in the table* below.
Taking into account, the formal Iraqi government prices and market prices of wheat and barley in 2019, the economic damage of the incidents is about 645,951,000,000IQD i.e. ($542,689,872) in government price. And it is worth 469,415,000,000 IQD i.e. ($394,374,753) in market prices. In addition, the reported fire incidents led to death of 4 farmers and 11 people injured. The fires burned all the living beings and grass with the crops, and only left damaged black fields for the farmers.

Why Fire Incidents?   

More than 72% of the fire incidents happened in three provinces; 103 in Salah Adin, 77 in Nineveh, and 69 in Kirkuk. These three provinces are located in the the disputed areas between Baghdad and Erbil. These were ravaged by war with so the called Islamic State of Iraq and Syria (ISIS), which consequently weakened security and governing institutions. The increased number of fire incidents in these areas made many people cast doubt on political agendas and suspect neighboring countries, believing that the target is Iraq’s food security and economic stability. 
Some of the fire incidents were accidental, but the majority of them were intentionally caused due to political reasons or land disputes. Iraq’s Directorate of Civil Defense Police stated that out of 272 fire incidents up to June 8th, 2019, 35 of them were set deliberately for unknown reasons, 25 of them were caused by spark of fire from the harvesters, 74 others by electric fusing, and 22 incidents were caused by cigarettes. Moreover, PM Adil Abdul-Mahdi, in one of his weekly pressers, stated that the fire incidents are normal and happen in many countries, asking local media to not sensationalize it.
However, several MPs and government officials rushed to accuse ISIS and neighboring countries for setting the fires. In a public announcement, Mukhtar al-Musawi, member of Bina Coalition in Iraqi Parliament, on Jun 9, 2019 stated, “There are doubts that neighboring countries like Saudi Arabia, Jordan and United Arab Emirates, are involved in fire incidents in order to weaken Iraq’s economy.” 
Believing in some conspiracy theory, several farmers in villages of Hawija (South of Kirkuk) and rural areas north of Salah Adin (where many fire incidents happened) told ICPAR that a certain neighboring country (especially Iran) paid their agents in Iraq to burn the crop fields. Believing that they want to keep Iraq dependent on their exports. In Sinjar (another disputed town in Nineveh) and Tauwq in (Kirkuk), local security forces and farmers believed that insurgents belong to ISIS are behind most of the incidents. ISIS also claimed responsibility of burning crops in their weekly newsletter, Al-Nabaa, targeting crop farms of senior officials in six Iraqi provinces and areas under control of Autonomous Administration of North and East Syria (Rojava). 
In Kirkuk, where many Arab, Turkmen, and Kurdish farmers are already in disputes over land ownership, there are some doubts about tribal and ethnic tensions to cause the fire incidents just to push out farmers from their villages.
In addition, “There are political parties working to hit the local products and not give importance to self-sufficiency in wheat,” said Ali al-Badiri, MP from the Reform and Reconstruction Bloc.

Environmental Damages

Regardless of who caused the fires, Iraqis are paying for its economic and environmental damages. The crop burning causes huge air pollution in the first place. It is a significant emission source of primary fine particulate matter (PM2.5) and gaseous precursors of secondary PM2.5, according to some environmental studies. “Environmental impacts resulted from open field burning of agricultural crop residue, includes visibility impairment, air quality degradation (sometimes heavy haze pollution) and adverse health effects, were explored.” 
This scale fires damage soil and adversely affect health of local population in overcrowded areas, especially around riverbanks, where respiratory diseases are already high in Nineveh and Salah Adin for example. 

How to Address the Concerns 

In the Middle East, no country’s agriculture sector has been affected by fire incidents as Iraq and Syria. This is mostly because of dysfunctional governmental institutions and lack of adequate extinguishing capacity and weak security measures. The role of security institutions and state is crucial for protecting crop fields and helping farmers conduct their harvest operations quickly and safely. Therefore, the Iraq’s security and police forces are expected to play a bigger role in preventing the same crop burning to repeat in 2020.
The Iraqi government is expected to take some security measures to prevent repeating the same incidents in 2020 and help farmers recover their economic losses. The Federal Government is expected to take following steps: 

– The Iraq’s security forces should come up with a better strategy to protect agricultural areas in the unstable provinces and areas taken back from ISIS. They should help farmers protecting their farms during harvest sessions and not let them doing it alone like what happened in Tawuq, where unknown armed men killed a farmer and wounded three others while trying to extinguish the fire on their fields. 
– The Federal Government should compensate the farmers whose crops were burned this year in order to be able to invest in their lands. Many of them have already lost all their capitals and wealth, and they can’t keep investing in their land unless getting some financial support. The government should provide loans to farmers and finance viable projects.
– There should be enough grain silos to receive summer and winter products. Providing this for harvesters will allow farmers to wrap up their harvest operations and they would not last for weeks when the risk of fire-incidents is too high.

*ICPAR summed up all the reported fire incidents in Iraq and KRI and then compared the reports with the Iraq’s civilian police reports to check their accuracy. The reports incidents took these amount of crop farms, but there might be incidents not reported to police forces or by Iraqi news outlets.

Categories
Economics

The Gloomy Future of Iraq’s Agriculture Sector

After years of drought, unexpected heavy raining damaged agricultural products in almost all provinces of Iraq. Just in Maysan, 75 percent of crops was damaged, and dozens of villages were completely evacuated in Basra, Diyala, and Al-Wasit. The flood-crisis, again, raised questions about Iraq’s long-time neglected agriculture sector, poor infrastructure, and food security while decision makers are still overwhelmed by government formation deals and how to avoid summer protests driven by lack of public services. 

The great amount of rain should have been the blessing of the thirsty lands of Iraq, but the ugly truth is that we end up with floods and destruction. It shows how Iraq’s agriculture sector is ill-equipped for the upcoming challenges and how the whole country’s water-management is just not adequate.
Iraq, used to be one of the most food secure and self-dependent country in the Middle East, currently imports about 90% percent of its food due to years of wars, climate change, and lack of proper agricultural policy. No government support has been paid off in this sector due to lack of planning and old infrastructure, affected by four decades of instability, military conflicts, and constant drought.

Hemn Mohammed Awrahim
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.

Author

The country’s agriculture sector could have been economic savior and a factor of stability as Iraq’s population growth is above 2.5 percent and youth unemployment is rising. However, similar to other resources, the already damaged sector does not get enough attention and is not properly managed. 
There has been a big debate over Iraq’s agricultural potentials. A CPR report to the US Congress in 2004 shows that only 22 percent of the country’s surface is suited for agriculture, and out of that number half is used for seasonal grazing of livestock. The fact is that many areas of Iraq can be used for farming but the main concern is water. If there is enough water and proper irrigation system, many areas can be fertile farmlands. Regardless of Iraq’s actual potential, domestic agricultural products have gradually decreased.

Wars and Instability

Since last month, which is crops-harvest time, about 280 fire accidents have burned more than 40 thousand dunams of crops all over Iraq, according to an ICPAR’s estimate to the reported fire-accidents. Directorate of civilian defense police stated that 67 of the fire accidents were caused intentionally or by outside sources. The crop burning is just an example of -agricultural damages caused by political, ethnic, and tribal disputes. 68 of the fire accidents happened in the disputed areas between KRG and FGO, according to multiple police sources.
Since 1980, Iraq have seen very little stability, undergoing three devastating wars and continuous internal conflicts. During 8 years’ war with Iran, Iraq kept the agriculture production stable and depended on local productions when it comes to vegetable and fruits even though there was a systematic diversion of labor force in this sector as the government drafted farmers to army. This and population growth caused “Iraq’s reliance on food imports to grow, mostly from the US.  The economic impact of the Iran-Iraq War was significant, resulting in delays on foreign loans, defaults to foreign contractors, and postponement of development projects, except for those vital for agricultural production.” Land mines and war remains also contaminated many agricultural areas.
The best example can be seen in Basra dates-trees. In 1979, Basra had 7 million dates-trees. By the time Iraq-Iran war was stopped, 1989, the number had fallen to 3 million trees. In the town of Al-Faw after the farmers left the city, the Iraqi army cut the water reaching to the town for irrigation and all the trees to make sure that it will not be used by Iranian Army as a safe haven. To clarify more, in 1980s, Iraq used to export 75 percent of its dates-protection around the world, but now it depends on import. The main problem was the war, but the aftermath of the war and neglecting the sector caused this major shift in the production. 
However, the most devastating war for this sector was 1991 Gulf War, when the US led international coalition drove Iraqi army out of recently occupied Kuwait and attacked many urban and agricultural sites of Iraq. The military engagement began with an aerial bombing campaign. In few weeks, it damaged Iraq’s irrigation infrastructure, electric grids, roads, bridges, oil refineries, factories, water purification systems, more devastation than 8 years Iraq-Iran war. Following the war, the UN sanctions against Iraq paralyzed any recovery attempt in the agriculture sector since Iraqi government was prevented from selling oil and import capitals and technology needed for the recovery.
Because of the sanctions, Iraqi agriculture did not see any intensification process, an increase in productivity by increasing inputs to cultivated lands. So, Iraq used extensification which is a process of expanding the cultivated areas horizontally. Till 2003, “Iraq’s irrigation infrastructure was barely functioning, prime cropland suffered from widespread salinization, and soil fertility had been badly depleted from overexploitation.” The 2003 US invasion of Iraq was not as devastating as 1991 war; thanks to precise targeting, the agricultural infrastructure was mainly undamaged. However, in the following years Iraq’s agriculture kept underinvested and never recovered due to lack of resources and major national plan.

The Endless Thirst 

Iraq had a great chance in 2003 to rebuild its agriculture infrastructure, but that did not happen despite great budgets and international help. The main problem that Iraq faced at that time was constant droughts and the decrease of the water flowing into both Tigris and Euphrates in addition to their tributaries coming from Turkey and Iran. 
The Global Warming has been the most damaging cause to the Iraqi agriculture sector in the long run. If some future forecasts would be true, the whole sector may disappear. In the last two decades, Iraq constantly faced droughts or irregular precipitation patterns that half of Iraq’s farmlands in the summer of 2018. Moreover, decreasing surface water, in many areas, pushed farmers to heavily depend on the reservoirs, and this has caused a real depletion of underground water. Some projections are expecting total dry out of Tigris and Euphrates, according to a report prepared by the Netherlands’ Ministry of Foreign Affairs. Iraq has little or no control over the sources of the major rivers and tributaries because they mostly coming from Turkey and Iran, and out of all the rivers and their tributaries in Iraq, only 8 percent are originated inside the country.
There is a proportional interlinkage between surface and groundwater in the Euphrates and Tigris river basins. Also, this relation is true for the rest of the country where the main rivers and their tributaries pass through. As, the Iraq’s share of the rivers and their tributaries decrease, the underground water is getting affected dramatically. This will directly lead to crop and farming failure as the land becomes drier and ultimately speeds up desertification in many areas.
As the flow of water from Tigris and Euphrates will decrease in the next decade and forward, the demand for water consumption will increase. Iraqi population is expected to reach 60 million by 2050, and this increases water consumption. A World Bank Group’s report in 2006 showed that Iraq’s water deficit will reach 25.55 BCM in 2030. 
Human consumption also deteriorates the quality of water, from north to south in both rivers, as Iraq does not have any water recycling system. In all Iraqi cities and towns, disposal waste water is dumped into rivers. Sewage pipes are directly going into Tigris and Euphrates, or their tributaries, polluting entire country supply of water. In the past 10 years, the level water contamination has increased by four folds in Basra, home city of more than 2.15 million population.  
The projections show that the situation will go from bad to worse, and if the projections come true, Iraq and its population will face many dimensional problems with endless consequences for Iraq and the neighboring countries. According to NMFA’s report, the 2050 projection will be the following:  
– Increase in mean annual temperature of 2°C.
-More frequent heat waves and fewer frost days.
-Overall decrease in mean annual average rainfall by 9 percent, with the greatest reduction during      December, January, and February;
-Decrease in the maximum amount of rain that falls in any 5-day period, but overall increase in rainfall intensity (heavy precipitation events [HPE]).
-Decrease in run-off of 22%.
-Longer and severe droughts.
-Increased flood occurrences (resulting from river fluctuations).
-Decreased agricultural production resulting from the increase in drought periods.
-Increased desertification as a result of the increase in sand and dust storms.
-Increased damage to infrastructure as a result of flooding and storms.
All factors included, by 2050, Iraq’s agriculture sector may fully fail, and the country may suffer finding enough water for human consumption, and become fully dependent on importing all its food needs. In addition, this does not mean only droughts, but rather continuation of unexpected precipitation patterns. However, droughts are the most repeated one, so the farmers have been adapting to a certain way of farming which has caused Iraq’s agriculture sector to be inflexible.
Lack of water, over many years, pushed many Iraqis to farm closer to the bank of the rivers and their tributaries depending on their old irrigation system; however, in the raining season of 2018-2019, the situation flipped as precipitation increased by more than three folds and damaged a lot of agricultural projects. In a province like Maysan, more than 75 % of the farmlands were damaged, and dozens of people were killed. Still no real statistics is available to measure the overall damage of 2019 floods; however, all the provinces were affected especially the southern ones. 

The Door of Hades is Opening on Iraq

The failure of agriculture sector in Iraq will have multiple effects not just on every aspect of life in Iraq. The direct result will be great loss of job opportunities for a segment of the society that have spent most of their lives in farms. In the late 1970s, agriculture in Iraq was employing 50 percent of the labor force in the country. Constant wars, lack of proper policies exposed Iraqi villages to great exodus from the rural areas to the urban centers. 

According to a UN estimate, in the next 8 years, four million Iraqis will be displaced, and each year over 250 thousand kilometers of the farmlands disappear due to desertification as a direct effect of the Global Warming. The future picture can be grimmer, if more chances to be wasted. Around 7 million people live along the bank of the Tigris River only, and if the current situation continues as now, the stream of the river may disappear or greatly shrink, and this will cause a great internal displacement to the areas with more water, but as all Iraq is suffering of the lack of water, then this can easily develop to a regional conflict.

After 2003, Iraq had a great chance to recover its agriculture sector by modernizing the whole sector, but instead, Iraqi governments invested heavily in hiring people in the public sector, which forced a great portion of the rural population to voluntarily move to cities. Not having any real economic opportunities, many of the newly moved population faced poverty and the socio-dynamic of both urban and rural areas of Iraq is distorted. Also, as in many areas around the Middle East, the loss of livelihood, especially in the rural areas has led to social and political conflicts. Iraq just finished a long and devastating war with ISIS, and if proper steps not taken to stabilize the lives of the marginalized groups in the rural areas, too many insurgent groups will pop up under different tittles and ideologies.
 While all the impacts of the Global Warming and failure of agriculture sector manifests itself in the lives of Iraqis, the Iraqi Government has not taken any serious step to handle the issue. Still, Iraqi politicians are busy with their pity politics which does not envision Iraq as a whole, but rather stays with the border of their political parties, tribes, and families. For Iraq to have a successful plan to tackle this issue, it needs a new national vision which goes beyond the sectarian and ethnic politics which runs the show. 
Iraq needs to take some steps to ensure that the situation will not exacerbate anymore. This issue needs attention and effort from the government and everyone who can help because the effects of the Global Warming are as dangerous as terrorism and corruption. These steps will start from modernizing irrigation system and introducing new technology to farmers in a way that will prevent overusing fertile lands and prevent wasting water. 
In addition, the Iraqi government needs to take water quality of underground and surface water, into consideration. The government has to formalize its approach in conversations with Turkey and Iran regarding their share in Tigris and Euphrates and their tributaries. Farmers need government to create more sufficient approach to farming and national strategy for agriculture must be created. Only by doing all abovementioned steps can we expect Iraq to make any progress in agriculture field. With the current speed of destruction, Iraq will not be able to do much, and the future generation will be born into a destroyed country and left with no choices except migration, which makes a big problem for Iraq and the whole international community. 

Categories
Economics

The Secret Behind Baghdad-Erbil Calm Relation IS $14 Billion Debt

The Kurdistan Regional Government (KRG) has not abided by submitting the daily oil quota (250,000 barrel per a day) to Iraq’s State Organization for Marketing Oil (S.O.M.O). The figure is the KRG’s contribution to the national oil export which is a clause in Iraq’s 2019 Budget Law. The KRG’s lack of commitment to hand over its oil has started a tension between Baghdad and Erbil as multiple political groups and populist leaders in Iraqi Parliament are pressuring Prime Minister Adil Abdul-Mahdi’s government to take an action against the KRG. 

However, it seems there is a mutual understanding between the both governments’ leaderships to let Erbil selling its oil in 2019 in order to pay back its accumulated debts, an estimated $14 billion. By the end of this year, they would reach a new oil-agreement to resolve their oil and financial disputes if the ongoing political pressure allows them.
The status quo will stay the same in 2019, and by the end of this year, they will start negotiating to reach a more comprehensive oil-agreement. Currently, the Iraqi leaders just want Erbil to keep paying its debts. “I think they would be happy to see us paying back most of the debts by the time we would ask for another agreement,” said one of the KRG’s leaders, talked to ICPAR on condition of anonymity. 

Rebin Fatah
Rebin Fatah

is oil and gas expert in ICPAR. His research focus is on Iraq’s oil and gas sector, and he has published two books on the same industry. He holds BA from Salahadin University-Erbil.

Author

The Erbil-Baghdad oil disputes started in mid 2000s, when the regional government invited international oil companies to invest in its oil and gas fields. The dispute is mostly over ownership of natural resources located in the region. Despite of being the subject of various lawsuits in local and international courts filled by the Iraqi Government, the KRG independently has contracted dozens international oil companies (IOC) and exports about 430,000 bpd according to multiple technical sources. 
From 2014 till October 2018, the Federal Government of Iraq (FGI) cut off the KRG’s budget share under the pretext of independently exporting oil and not handing over its revenues to FGI. The 2019 Budget Law conditions the KRG’s budget share based on its contribution to national oil export, handing over 250,000 barrels of its oil to OSMO every day. Contrary to the previous years’ budget laws, the article 10 of 2019 budget law assures the KRG to receive some portion of its national budget regardless of the political disputes between the both governments or how the KRG abides by the law. This portion of budget is titled as salaries of the KRG’s civil servants. The KRG, received 453 billion IQD (about 379 million USD) every month for salaries of its civil servants, according to Rebaz Hamlan, the KRG’s Minister of Finance (MF).
Now, several political groups and factions are using the oil dispute as a case against PM Abdul-Mahdi’s government. Last week, Iraqi Parliament invited the Minister of Finance, Fuad Hussein and Minister of Oil, Thamir Ghadhban to explain why the KRG has not contributed to the national oil export while it received monthly transfer from FGI, according to Ghalb Mohammed, member of Iraqi Parliament’s Oil Committee. The ministers’ answers and MPs’ skeptical questions just reflect the ongoing pressures that some political factions have started on the Abdul-Mahdi’s cabinet.

Oil for Budget Agreement

The Erbil-Baghdad oil disputes are more complicated than what it appears as a financial discussions by some MPs and political figures. Dozens of IOCs and Turkey are also involved. The companies invested in the Kurdistan’s oil sector based on production-sharing contracts, and Turkey is also involved by letting the KRG selling its oil by the Kirkuk-Ceyhan pipeline, which recently joined to Kurdistan’s pipeline after ISIS demolished the Kirkuk’s pipeline. 
The Federal Government of Iraq wants the KRG to hand over its oil, but it does not payback the KRG’s debts and financial dues of the IOCs that produce the oil. Five years of federal budget cut, ISIS’ war, and oil price crash indebted the KRG to almost $20 billion. Currently, the KRG’s local and international debts are estimated to be about $14 billions, according to an ICPAR’s rough estimate based on the KRG’s available data. Part of these debts that the KRG has to pay back were taken as pre-payment from IOCs and oil traders in advance of selling the region’s oil. Now, the KRG needs to honor its agreements with the IOCs and deliver its oil according to the agreement. 
Likewise, the FGI’s debt is $ 162 billion, and it does not have the financial leverage to shoulder the KRG’s debts too, according to Ahmad Haji Rashid, member of Iraqi Parliament’s Finance Committee. The FGI officials would like to see the KRG is paying back its debts, but they are also under huge pressures from several political parties and blocs, who are also capitalizing on weakening the current Iraqi Cabinet.

How Serious the KRG’s Constrains?

Risking bad relation with Baghdad is not a viable choice for the KRG which has not recovered from its 5 years recession and financial crisis. The region needs 881 billion IQD/month as executive budget and salaries of its civil servants. It gets 453 billion IQD from the federal government 350 billion IQD from its oil exports in addition to some transfers from the US led coalition against ISIS, according to Hamlan. 
Now, the KRG’s priority is to pay back its debts and continue paying its civil servants, according to Hamlan. The region’s leaders were hoping to get the FGI to pay the KRG’s debts back in exchange for handing over its produced oil to SOMO; however, this was a too bad of a bargain for the FGI. The KRG tried to push the FGI to share of the debts by dedicating some of the national budget to pay IOCs’ that work in Iraq, but that was also too wishful from the KRG. So, the choices are limited while the debts have to be paid. Since July 2018, the KRG has paid back more than $6 billion debts of its total loans which was about $20 billion in its peak as the following.

All the figures are taken from the KRG’s ministry of finance and Deliotte’s six reports on the region’s oil sector.
If the KRG keeps paying back its debts in the same rate, it needs two years and a half (30 months) to pay back all its debts. However, it is hard to believe that the region will get the FGI’s monthly transfers after December 2019 given the current political debates in Baghdad. If oil price does not go down and Baghdad keeps sending the monthly transfer to Erbil, by the end of this year, the KRG would reduce its debts to $9 billion.

The Secret Behind the Erbil-Baghdad Calm Relation

Although influential political factions and figures are pressing the MP Abdul-Mahdi’s Cabinet to act against the KRG and inflict the same financial penalty that the previous Iraqi governments imposed by cutting the KRG’s budget share, the Erbil-Baghdad relation is still good. Usually the both sides’ leaders insist on resolving all their oil and financial disputes by dialogue, and a KRG’s high official is expecting to have a new oil deal with Baghdad to address the current complications.
A high level KRG’s official said, “The Baghdad-Erbil disputes and complications over oil and national budget are expected to be eased. We have continuous talks with the PM Adil Abdul-Mahdi and other federal officials about the oil disputes. The federal government is waiting for Erbil to pay back its debts through its oil till the end of 2019, and then the both governments will broker a new deal over the oil disputes and the KRG’s share in 2020 national budget.”
 The new deal is expected to be similar to the previews ones in term of obliging the KRG to hand over its oil to SOMO and making the FGI fully deliver the KRG’s national budget share. However, with the KRG paying back most of its debts, the reduced KRG obligations to IOCs will help the both governments reach a new compromise easier and sooner, according to the KRG’s official. 
Recently, Ayad Allawi, the Interim Prime Minister of Iraq from 2004 to 2005 and leader of Iraqi National Accord, started mediating between Baghdad and Erbil, and in an interview with Al-Taghayer Satellite Channel stated that Masud Barzani, the former KRG President and head of the Kurdistan Democrats Party (the region’s ruling party) promised to send a delegation after Ramadan Eid to Baghdad, negotiating all the disputes over oil and national budget. 
The both Erbil’s and Baghdad’s leaders expect to broker a win-win deal in which the KRG will be able to meet its obligations to the both SOMO and the IOCs, according to the KRG’s official. However, there is a risen pressure from several factions in Iraqi Parliament (especially Haidr al-Abbadi’s Nasr Coalition and Nuri al-Maliki’s State of Law coalition) to drive the Abdul Mahdi’s government against the KRG and cut its budget share, similar to what the former prime ministers did.

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Economics

A Case Study: This Is How Private Businesses Decline in the Absence of a Marketing Strategy

What would happen when a private firm lacks an efficient marketing strategy? This case study is an investigation on lack of marketing strategy in an Erbil based private firm called Al-Wafi Company, provides foreign labors to local businesses.

After more than seven years, the company’s leaders started using some basic E-marketing through Facebook Network at the cost of missing too many opportunities and potential clients, according to Shekh Omer, founder and CEO of the company.

 “I just realized that the company can’t survive without some sorts of advertisement,” added Shekh-Omer while describing the gradual decline of his business when most his competitor are growing.

The company provides foreign, mostly Asian, unskilled labors to Iraqi market. Due to all the business opportunities it lost and lack of a proper marketing strategy, the company is on the brink of bankruptcy. 

Using Porter’s Five Forces theory and SWOT analysis, this paper shows what determines a company’s strengths and weaknesses and what threat and opportunities are ahead of it. The analysis basically suggest that the company cannot keep operating and make profit unless It pursues a proper marketing strategy.

Ary Hamed
Ary Hamed

is business and market analyst at ICPAR. His research focus is on KRI‌s private sector, startups, and business challenges. He holds MBA from The American University of Iraq-Sulaimani.

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Missing Opportunities

Recently, several recruiting companies tried to respond to the Iraq’s expanding demand for unskilled foreign labor. The foreign labors cost less, and they do the work which most of the Iraqis avoid. Many companies prefer to have them since they are not accustomed with local rules, and they are ready to work extra time without being paid extra. Some of them works 12 hours per day with no normal weekend break. Thus, many firms prefer foreign labors for unskilled employees.

Al-Wafi emerged in this market as a foreign-labor provider in Erbil, but it has not grown alongside with a market-expansion strategy as demand has grown for its service. Actually, it has barely survived as it has not been able to reach out to most of its potential customers and done very little to promote its services.

Most of the labor-providing companies bring workers from low income countries and provide them with visas and residency permit. The market is growing and the labor demand is raising as Iraq’s economy is recovering after the end of the war with ISIS and oil price crash. But Al-Wafi can’t catch up with the market growth as it has no strategy to reach out to its potential customers.

Alwafi, as well as other companies, needs an effective marketing strategy. Clients do not know about Al-Wafi is if the company does not make any effort to reach them. It has to allocate a budget for marketing with a functional strategy. It also needs to review its action plan and evaluate what it has done in order to see what went wrong/right in its past 8 years.

The point of such a marketing strategy is to make the companies’ name remembered when clients make purchases. Or when they think about obtaining a product or a service. The first name that comes to their minds is the names of the producers and service providers that had appropriate marketing strategy. 

As Al-Wafi has lacked proper marketing strategy, it has lost lots of potential customers, according to Shekh-Omer.

Categories
Economics

Iraqi Kurdistan, Towards An Inclusive Labor Market

News 01022017. No repro Fee. Tanaiste Addresses International Protection of Refugees and Migrants. Conference addressing Ireland's role in responding to the international refugee and migrant crisis today at an international event focused on Ireland’s International Protection System, hosted by the Irish Human Rights and Equality Commission. Tanaiste Frances Fitzgerald TD also addressed the event alongside key national and international experts including Irish UN Ambassador, David Donoghue who co-chaired the landmark 2016 UN Summit on Refugees and Migrants, the Greek Ombudsman for Children, George Moschos, Chairperson of the UN Committee for the Elimination of Racial Discrimination, Anastasia Crickley and speakers from organisations such as the Irish Refugee Council, Mayo Intercultural Action, Nasc, TCD and the International Protection Office. Chris Bellew / Fennell Photography.

Women had noticeable active labor participation in the pre-modern patriarchial Kurdish communities. Beside their house-holding cares and rearing children, they were participating in farming and various bread wining activities such as sheep-herding, construction, and weaving rugs. This active female labor participation lasted till mid 20th century, when successive Iraqi governments started disrupting and halting them.

The Iraqi governments disruptive interventions by carking down on Kurdish rebellions basically changed the structure of Kurdish society; they displaced them and destroyed thousands of their villages. Their military operations and conflicts transferred lots of grazing lands and productive farming fields to land-mine fields. 

Government policies, military conflicts, and security measures responding to the ongoing instability pushed Kurdish country-dwellers to leave their villages and flee to some newly built compounds and towns, that were less vigorous from Holocaust concentration camps.

Bakhtiar Rashid
Bakhtiar Rashid

is political analyst in ICPAR. His research focus is on development and gender issues in Kurdistan and Iraq. He holds MSc from York St John University.

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Though, the males could adapt to the new environment and quickly pick up new professions and town’s lifestyle, but women could not. They basically lost their economic roles, and their options were limited between house-holding care and reproduction. Consequently, several generations of Kurdish women stayed without any opportunity of paid work.

The New, But Unfriendly, Labor Market 

Currently, many Kurdish women, with college degrees and needed skills, are looking to gain access to the labor market in both public and private sectors. Due to the recent financial crisis that hit KRI, public sector stopped to create any new opportunity for them, while this sector used to be the main job-maker for educated women. 

Now, graduates are looking for jobs in private companies or opening their own small businesses and entrepreneur projects. Many malls, supermarkets, private schools, kindergartens, and small shops in big cities and towns are run mostly by women.

In some businesses and sectors like female clothes-stores, cosmetic shops, clinics, pharmacies, laboratories, the number of female-employees has increased. Even though there is no reliable data and statistics to show how big and effective the improvement is, it could be seen as an important economic and social breakthrough for modern Kurdish society.

The new female workers are quite different from those who used to work in village economy and mostly doing unpaid-within family jobs. Currently, they have their own paid work and direct income. This phenomenal change is expected to elevate their status in family power-structure and their relations to their fathers, brothers, and husbands.

 The fact that she works and can support her family financially makes her more valued and esteemed, considering the bitter memories that previously Kurdish parents valued their sons and liked to have boys rather than girls. The mentality was reinforced by the fact that boys have better access to labor market than girls; in addition to other religious, cultural, and political factors.

Current Challenges and Needed Solutions

Despite the aforementioned positive signs for improving women’s labor market, there are many challenges to the new female labors in KRI. All the region’s financial, political, and economic crises following the ISIS war and international oil price-crash badly affected them. 
Plus, they are also suffering with the KRIs weak legal system and ineffective governmental institutions regarding all the workplace challenges.

The KRI’s financial crisis, started in 2014, slowed down economic growth and left hundreds of thousands with no jobs. The risen unemployment created a golden opportunity for private sector companies to take advantage of this cheap labor supply. It lowered down their payments and harden their work conditions; usually as in any market where labor supply is higher than demand.

To prevent business owners from exploiting the over supplied labor hands, especially female workers, government institutions interventions are needed. There should be strict law enforcement institutions to protect female-workers and make sure that their environment is good enough and their rights are not violated.

 There are actually some good laws and directives to guarantee female labors rights, but the law enforcement institutions in KRI are too weak to protect female employees from work-place challenges. There is always a room to play with the labor-friendly laws and ultimately exploit employees.

For instance, a private kindergarten in Kalar (South of Sulaimaniayah), hired a teacher in a salary of 200,000 IQD (about $168)/month, while the salary is 300,000 IQD on her contract. The kindergarten can’t hire her less than 300,000 IQD, which was set as a minimum wage by relevant educational institutions’ directives. This is just an example to show how the oversupplied job market enabled business owners to exploit female labors. 

Similar to other Middle Eastern countries and regions, the dominant patriarchal mindset poses many issues, stereotypes, and gender roles that could keep women away from labor market. Some of them are actually designed just to disadvantage women in workplaces. 
Government institutions, rights groups, policy makers should address these issues and play their roles in providing fair and safe work conditions for women.

Categories
Economics

Iraq‌’s Underdeveloped Data Market Could Be the Region’‌s Fastest Growing Industry

In the Middle East, Iraq is one of the least-developed telecom markets mainly because of its fragile security. Thus, mobile network operators have had to struggle to maintain their networks to keep up with growing demands and to properly invest in their infrastructure.

International and domestic hope for Iraq’s economic recovery mainly depended on its large oil and natural gas assets, but the country has great potential for telecom infrastructure development and capability to develop 3G and 4G network services. There is also possibility of increasing mobile data revenues from existing 3G/2G networks.
However, lots of mobile infrastructures have been damaged in the conflict-affected areas.

Currently, three major telecom companies are licensed to provide internet services nationwide (Zain Iraq, Asiacell, and Korek Telecom). In addition, many minor companies provide this service, especially in the Kurdistan Region of Iraq (KRI). 

Shiraz Jalal
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.

Author

In Kurdistan alone, 60 companies have been registered and licensed by the Kurdistan Regional Government (KRG) ministry of transportation and communications to provide data services, according to Omed Mohamed Saleh, spokesman for the ministry. Asiacell, the second biggest telecommunication company in Iraq, is the leading data services provider in 2019.

 Mapping the Companies’ Volumes Based on Data

 The following table illustrates the total number of subscribers for the major companies in the last quarter of 2018 and the first quarter of 2019. In Q4 of 2018, the total number of subscribers in Iraq was 39 million (40% Zain Iraq, 36% Asiacell, and 18% Korek Telecom). 
Asiacell was the main provider of mobile broadband services and wireless Internet, as its market share is 38%, followed by Zain and Korek.

(Data Source: www. gsmaintelligence.com)

In Kurdistan

Although many companies provide data services, they are not effective as the prices are high and data-speed is low. 
The companies blame bad infrastructure, fragile security, and political instability for the high prices and poor service. They must follow regulations from the National Communications and Media Commission of Iraq (CMC) and the Ministry of Transport & Communication of Kurdistan. 
The CMC has recently issued a rule prohibiting some of the international telecommunications equipment suppliers from selling their products to companies registered only in Kurdistan (not by CMC). As Mohamed Saleh stated, “The CMC has issued a new regulation under which international companies (such as Huawei) which are not registered by the CMC are forbidden to supply materials to telecom operators in Kurdistan. The companies have to find their own ways to buy and import the products.”    
Beside the regulations, closing Kurdistan’s international airports also negatively affected data service providers. They had hard time importing equipment necessary to improve their services. For instance, they had to import their capital equipment through Turkey or Iran and then to Iraq and finally Kurdistan. Given the expensive transportation costs and wasted time, the companies’ services deteriorated and became more expensive. Consequently, consumers paid higher prices for poor service. 

Consumers’ Reaction

To make their voices heard, consumers in Kurdistan organized in small groups and NGOs to express their complaints against the companies that provide data services. Yaqub Kakil, head of the Shaqam Committee for Human Rights and Freedom, stated that the companies provide low-speed internet for high prices. “It is benefiting business owners at the expense of the people,” he said, adding that although the complaints were sent to relevant Iraqi federal institutions, it is still not clear how the federal government is going to respond. 

Lack of Equal Opportunity Hurts the Industry as Well as Consumers

Companies headquartered in Kurdistan face regulations from both Baghdad and Erbil, and they also are affected by the governments’ political disputes. However, the companies headquartered in the middle and southern Iraqi provinces are subject only to the federal government’s regulations. They also get significant financial support compared to the Kurdistan-based companies. 
Zain, a major telecom and data service provider headquartered in Baghdad, is a partner of the International Finance Corporation (IFC), which is a member of the World Bank Group. In 2018, it successfully secured a $269 million financing package including a seven-year loan to help reconstruct the country’s telecom operations.  
The financing package will help Zain to enhance its capacity and the quality of its 3G network. It also helps it to expand coverage to unserved areas and to start developing 4G networks. It allows the company to modernize its networks and customer service in northern Iraq. 
 In an article published on Zain’s website, Mouayed Makhlouf, the IFC’s Regional Director for the MENA (The Middle East and North Africa) Region, said, 
“Supporting infrastructure development in Iraq is an essential building block of the reconstruction effort. Restoring and enhancing broadband infrastructure can have a substantial multiplier effect on the economy through increased connectivity, reduced transaction costs, enhanced flows of information, and more efficient and effective matching of market players, among many other much-needed benefits.” 
The financial package, indeed, helps to improve the industry and benefits customers. But why are Kurdistan-based companies denied such financial support?  
Kurdistan-based telecom companies need financial support to provide better and less-expensive services. Plus, having headquarters in Kurdistan should not result in more taxes and political punishment from the dual regulations and fractured relations between Erbil and Baghdad.   

For Data Operators, How to Keep Up with Customers’ Demands

 Nowadays, operators are struggling to cope with fast-growing customer demands. Customers are engaging in activities such as video chatting and online gaming that can overwhelm and slow the network. As a result, operators fail to deliver sustainable customer received usage experiences. They are working hard to maintain their customers and generate enough cash to cover their costs, but when they are unable to do this, they start cutting rates to keep customers from rivals, or they trigger destructive price wars. To successfully remain in operation, companies need to shift their focus from rigid engineering network performance to a new customer-driven metric, to better manager customer experiences. 
In this way, successful operators will be able to provide good service to customers using the network, and then can decide how much bandwidth is required to provide such service for each activity and act on that information in real time.
On the other hand, in rural and conflict-affected areas, telecom infrastructure is compromised. It is the responsibility of big operators like Asiacell and Zain to fix the damaged sites and networks in those areas to provide internet coverage. 
Although a majority of the companies claim that they are 3G network operators, most of their sites are still 2G. This is one of the major causes of the bad Internet quality in the areas. This provides huge opportunity for the operators to have full 3G coverage in all of Iraq, and with it, coverage will be expanded and data quality will be improved.  

For the KRG

 It is not beneficial for the KRG to issue operating licenses to companies until they are registered by the CMC. Pre-requirements for CMC-registration help reveal which companies have enough capacity to provide the promised services and which ones do not.  
Iraq’s ministry of transport and communication, as well as the CMC, should coordinate with the KRG to better regulate the three major companies’ service and operations. They should closely monitor the data service quality provided to customers.
As it stands, the companies operate in a relatively free and competitive market, where supply and demand sets prices; however, when Internet quality is substandard and too expensive, it is the responsibility of the governments to intervene and set the price point.