Iraq’s Future: Open Markets or Central Planning?

As we reported in recent days, Iraq has decided to offer 18 factories to foreign investors to renovate and run, on very attractive terms.

According to the reports, the deals are to be sweetened by some very interventionist means, such as paying half the wages of Iraqi workers in those plants, and restricting the importation of competing products.

That is not to say that the deals are without risk, but as a result of these measures they will probably provide some profitable opportunities for those willing to accept the challenge.

Good news for some, but wouldn’t Iraq’s people and businesses be better served by allowing them to buy the products they want from whoever offers them the better deal, rather than restricting their choice in order to favour local businesses that are already subsidised by their taxes?

Competition can be tough, even brutal, but without it businesses get lazy and apathetic, and customers end up paying more for lower quality. It’s not just a theory – other countries, not least in the old communist bloc, learned that lesson the hard way.

Iraq could learn from the experience of other countries and avoid the mistakes of protectionism.

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