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Iraq Business News Expert Blogger, Dr Amer K. Hirmis, has just published a book that takes readers 6000 years back to early Mesopotamian polity, culture, and religious codes which shaped the economy, and continue to shape much of the body of Iraq's polity, economy and society today.

Economic inefficiency, inequality and lack of sufficient employment are common threads that run throughout Mesopotamian/Iraqi economic history. The persistence of poverty, high unemployment, conscious discrimination against women, and a polity dictating blind allegiance and obedience from the subjects to the ruler, denied the Iraqis achieving economic development, the ultimate aim of which is the sustained improvement of the well-being of the people. Even when economic growth was attained, it was desperately non-inclusive.

With a novel approach to economic development, this book examines Iraq's economy over the past 100 years. It establishes the historical roots in the consumption patterns, nature of the producers, the economic structure, trade, monetary and fiscal policy and resource allocation. In all these areas the echoes from the ancient past are striking. The principles of Sumerian taxes are still applied in present-day Iraq.

The book proposes a set of conditions, which will need to be created for Iraq to achieve economic development and functional democracy, in the distant future.

Download the book free of charge.

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As we publish our first newsletter of the new year, we'd like to say a special word of thanks to all of our contributors, including our panel of Expert Bloggers, who have given us the benefit of their wisdom and observations over the past twelve months:

• Ahmed Mousa Jiyad
• Ahmed Tabaqchali (AFC Iraq Fund)
• Alice Bosley and Patricia Letayf (51 Labs)
• Amer K Hirmis

We look forward to reading more from them in the coming year.

We'd also like to thank all our readers and well-wishers for making Iraq Business News the must-read publication for everyone with an interest in Iraq, and we ask you to please support our valued advertisers, who make all of this possible.

Click here to Advertise on Iraq's Premier Business Website

It is also important to remember two Iraq-focussed charities that are doing amazing and much-needed work in the country:

• AMAR International Charitable Foundation; and,
• Iraqi Children Foundation (ICF).

Any donations made to them will make a big difference to the lives of so many vulnerable people in Iraq.

With another challenging but potentially rewarding year to come, Iraq Business News will be with you every step of the way, wishing all of you a happy, peaceful and prosperous 2022.

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By Humam Miscone, for The Iraqi Economists Network (IEN). Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

World Bank's Assessment Is Flawed - Manufacturing Is Viable in Iraq. Additional Reflections on Iraq's Industry.

These additional reflections are prompted the article of Dr. Amer Hirmis entitled "World Bank's Assessment Is Flawed: Manufacturing Is Viable in Iraq... Preliminary Brief Comments!" (Hirmis, 2021), which provided critical assessment and comments and challenged some of the analyses and recommendations provided in a recent WBG document entitled "Breaking Out of Fragility A Country Economic Memorandum for Diversification and Growth in Iraq" (WBG Memorandum) (October 2020).

Initially, I would like to recognize and record my general agreement with the arguments and comments of Hirmis (2021).

The WBG Memorandum's envisaged a vision for Iraq's economic diversification and growth that, while concentrated on agriculture and agroindustry, completely ignored the manufacturing industry that flourished in Iraq in the 1960s - 1980s.

Instead, the WBG Memorandum vision actually brings Iraq's economy back 70 years ago, to the early 1950s, when Iraq used to be net exporter of crude oil, wheat and dates and had nascent industrial sector, limited to textile and some construction material industries.

These additional reflections are intended to support the arguments on Hirmis (2021) regarding the manufacturing industry and to provide information and evidence that manufacturing industry, particularly mining, mineral and chemical industries, could be of equal importance to agriculture, agroindustry and even oil industry and could ensure the aspired economic diversification, growth, job creation as well as integrated and balanced territorial development.

Please click here to read the full report.

(Source: IEN)

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The Iraqi Economists Network (IEN) has just published a new report from our Expert Blogger Dr Amer K. Hirmis, which we re-publish here with the author's permission.

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

World Bank's assessment is flawed: Manufacturing is viable in Iraq!

In late September 2020, the World Bank published a report entitled 'Breaking out of fragility: a country economic memorandum for diversification and growth in Iraq' (henceforth WB 2020).

In October 2020, the Iraqi government published its 'White Paper for Economic Reforms: Vision and Key Objectives.'

This was followed in January 2021 by a draft 'White Paper for Economic Reforms: Reform Implementation Plan' - a "plan" covering 'governance' and 64 'projects' (if tasks).

The latter requires 3-5 years to implement, and is said it "enjoys the support of the international community." The two White Papers (henceforth WP-I&II) quote and borrow extensively from WB 2020 report. In drawing a specific direction of travel for Iraq's economy, analogies abound in all these documents.

This note argues that the WB's analysis on which its 'diversification and growth' proposals for Iraq are based is flawed. This is particularly the case in the way Iraq's economy is characterised as one suffering from "the Dutch disease."

There is also a glaring omission of the manufacturing sector, and its role in diversifying the economy. Rather, emphasis is placed on 'agrifood'; a strategy reminiscent of IBRD/WB's economic reform proposals for Iraq back in the early 1950s.

Despite their flaws, however, if the objectives of the WP-I&II are realised even at 70-80 percent rate within 3-5 years, the results will be commendable. They would make a significant contribution to urgently needed institutional reforms that would in turn build foundations for economic reforms in Iraq.

Both WP-I&II suffer from similar flaws apparent in the WB's report. A glaring omission in the WP-I&II is the absence of the 'The Ministry of Industry and Minerals' (MoI&M) in spite of the fact that many of the tasks set out in WP-II require the ministry's attention, especially when many of the state owned enterprises (SEOs) it manages suffer from multiple problems. It remains unclear whether this omission means that the authors of WP-I&II agree with some international institutions that manufacturing perhaps is not viable in Iraq. Or, whether there might be other possible explanations.

This note argues that the manufacturing sector forms a critical part of any attempt to diversity the Iraqi economy away from its damaging over-dependence on crude oil revenue. For decades now, Iraq's economy has been transformed into a distribution/consumption, not an investment-driven, economy, due to excessive overdependence on oil, and the way oil revenues have been abused by successive Iraqi governments. In devising and implementing economic diversification policies and institutional reforms, the Iraqi government should, arguably, look forward, not backwards.

Read Dr Hirmis' full report here.

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As we publish our first newsletter of the new year, we'd like to say a special word of thanks to all of our contributors, including our panel of Expert Bloggers, who have given us the benefit of their wisdom and observations over the past twelve months:

• Ahmed Mousa Jiyad
• Ahmed Tabaqchali (AFC Iraq Fund)
• Alice Bosley and Patricia Letayf (51 Labs)
• Amer K Hirmis

We look forward to reading more from them in the coming year.

We'd also like to thank all our readers and well-wishers for making Iraq Business News the must-read publication for everyone with an interest in Iraq, and we ask you to please support our valued advertisers, who make all of this possible.

Click here to Advertise on Iraq's Premier Business Website

It is also important to remember two Iraq-focussed charities that are doing amazing and much-needed work in the country:

• AMAR International Charitable Foundation; and,
• Iraqi Children Foundation (ICF).

Any donations made to them will make a big difference to the lives of so many vulnerable people in Iraq.

With another challenging but potentially rewarding year to come, Iraq Business News will be with you every step of the way, wishing all of you a happy, peaceful and prosperous 2021.

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By Dr Amer K. Hirmis, Capital Business Strategies Ltd.

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

Iraqi Dinar needs political support...to serve the economy!

The Iraqi Dinar (IQD) was devalued by nearly 23 percent on Saturday, December 19, 2020, from its previous (official) price of 1,182 IQD down to 1,450 IQD per one US$.

The ministry of finance said the devaluation has been agreed with the International Monetary Fund (IMF), and serves the diversification of the Iraqi economy. [i]

Typically, devaluation serves the following key purposes:

• It makes exports more price-competitive, and hence leads to more exports being sold, though this may not necessarily lead to a corresponding fall in the value of imported goods/services.
• Policymakers also hope that currency devaluations leads to 'expenditure-switching', that is consumers spend their money on output of domestic firms, rather than on imports. Expenditure-switching may, additionally, be supported by imposing (new/extra) tariffs on imports and/or introduce quotas, which directly reduce expenditure on imports. These measures are also aimed at improving both the balance of trade and (indirectly) the balance of payments.
• Finally, depending on the elasticities of supply of goods, inflationary pressures might ensue in the short- to medium-term.

In Iraq, the policy makers at the Ministry of Finance and Central Bank of Iraq (CBI) have on the same day expressly outlined the reasons for the IQD's devaluation:

"First, there was a feeling that IQD was over-priced in comparison with the US$ [ii]; encouraging imports, the exodus of capital, and discouraging foreign investment and tourism, with the economy thus leaning towards commerce and retail trade rather than productive sectors; second, overall, given over-priced IQD, the Iraqi economy becomes less competitive, and the Iraqi markets controlled by imports; third, high valued IQD, in general, does not encourage investment in sectors Iraq wishes to develop, e.g. agriculture, tourism, industry and services; fourth, adjusting the value of the IQD will increase the proceeds from oil revenue in IQD, and will lessen the budget deficit, but the timing of the devaluation now is organically linked with the acute decline in the state's oil revenues, and the price of the IQD should reflect this reality." [iii]

Arguably, the IQD's devaluation presents a litmus test to Prime Minister Mustafa al-Kathimi [al-Kadhimi] and his finance minister Ali Allawi. In so doing they have bought precious time - this is the moment of truth!

Decisive political and economic actions are now needed to protect the IQD and the economy from sliding into the abyss. Al-Kathimi must now subvert the deliberate and well-organised intruders (defined below) who since 2003 continue to exacerbate a cycle of fragmentation of the economy and society in Iraq.

It is al-Kathimi's supreme obligation to provide against the intruders, which aim to deepen strife, acting against the common good.

To save the Iraqi economy from collapsing, Messrs al-Kathimi and Allawi have a short-term window: January-June 2021. They will be well-advised to focus on three critical issues - politics, economics and export-oriented diversification...

Please click here to download Dr Hirmis' full report in pdf format.

 

Dr Amer K. Hirmis is Principal at UK-based consultancy CBS Ltd. (2008-present). In October 2009, Amer began a 20-months assignment as Senior Development Planning Advisor to the Ministry of Planning in Iraq (funded under the DANIDA programme for 'peace and reconstruction' in Iraq). The posts Amer has assumed include Chief Economist and Head of Policy at the London Chamber of Commerce and Industry (1992-5), Economic Advisor to UK South West Regional Development Agency (1996-8) and Associate Director and then Head of Consulting and Research (Middle East) at the global firm DTZ (1998 to 2007).

Dr Amer K Hirmis is the author of 'The Economics of Iraq - ancient past to distant future' (Grosvenor House Publishing - United Kingdom) https://www.amazon.com/Economics-Iraq-Ancient-distant-future/dp/1999824105)

 

[i] See http://www.mof.gov.iq/Pages/MOFBannerHeadlineDetail.aspx?BannerNewsID=886, and https://cbi.iq/news/view/1624. Both websites accessed on Dec. 20, 2020.

[ii] This assertion is contrary to findings of a recent report from researchers at the CBI, which suggests that on the basis of PPP (purchasing power parity) the IQD is undervalued by anything between 4-14 percent at 1,182 IQD = 1 US$. See Mahwoos, A. Hussain and Muhammad, B. Qasim (2020) 'Iraqi Dinar: 1200 IQD/US$? (Available at the http://iraqieconomists.net/ accessed on November 23, 2020)

[iii] See answer to question no. five: 'reasons for changing exchange price/rate?' posted at the Ministry of Finance's website, noted in _i above (original in Arabic; author's translation).

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By Dr Amer K. Hirmis, Capital Business Strategies Ltd. - UK.

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

Iraq's PM meets the President of the United States...
What outcome...for the Iraqi economy?

 Introduction

This Thursday, August 20th, the "President Donald J. Trump will welcome Prime Minister Mustafa Al-Kadhimi of the Republic of Iraq to the White House...As close partners, the United States and Iraq will look to expand (their) relations across a range of issues, including security, energy, health care, and economic cooperation." [1]

The question is: what does each side expect, indeed wish, the outcome of the talks and negotiations should be?

Here, some aspects of the potential for 'economic cooperation' between Iraq and the U.S., in the near/medium term are covered.

A likely U.S. perspective

Contextualising the US perspective, one could speculate that its strategic interests in Iraq, and the Middle East generally, can no longer be secured by exchanging oil for political support and the export of arms. The last 100 years have shown that this is not a sustainable position, and it must change. Stability in Iraq, though, is critical for securing US's strategic interests. Having invested enormous human, financial and political capital in Iraq, the US would encourage the establishment of a diversified, "free-market", economy based on increased employment in productive sectors (thus alleviating poverty), good governance and rule of law. The US could help in tackling pervasive corruption (a major economic cost and hazard to doing business in Iraq) in part by deploying advanced technology.

More specifically, The US recognizes the existentialist economic challenges facing Iraq in light of these three crises: the post-2003 disastrous economic policies that nurtured widespread corruption, increased the economic power of (Iran-backed) influential personnel within/without the state apparatus and the (armed and well-financed) Hashd militias; the COVID-19 pandemic; and, finally, the severe decline in oil prices, in March/April of this year.

The US also recognizes that Iraq should enact fundamental economic reforms, which, from a US view point should consider:

1. The 2008 Strategic Framework Agreement (SFA) with Iraq. The fourth point in the Preamble emphasizes "the building of a diversified and advanced economy that ensures the integration of Iraq into the international community." This is echoed in Section V of the SFA. Section V (point no. 7) which goes further to say "Facilitate the flow of direct investment into Iraq to contribute to the reconstruction and development of its economy." The US would assert that the 2008 SFA is a reasonable and rational vehicle to do so, providing there is a strong political will, and public acknowledgement of the constructive part both parties should play, without which democracy in Iraq will not take root in the long-run;

2. Making use of US economic advisors to work directly with the Government of Iraq to help advance international support for Iraq's reform efforts, including from the international financial institutions. They know that Iraq may not concur on all parts of this point; there is already a wealth of research by economic experts pointing to what needs to be done to initiate economic development in Iraq. The time now is for action - i.e. policy implementation, and soon. Iraq might argue that this (al-Kadhimi's) government needs to demonstrate its worth for the people of Iraq, given the planned general elections in June 2021;

3. The enactment of 'firm plans for fundamental economic reforms' soon; the enactment of these plans by parliament is a pre-requisite for US involvement in investment projects in Iraq. Arguably, Iraq must soon create the conditions for foreign investment to take place on a wider scale, and reverse the recent decline of FDIs in Iraq, as the 2019 UNCTAD report indicated. The conditions for doing business in Iraq must change soon, and become favourable - these, as the 2020 World Bank's 'Doing Business in Iraq' report shows, are diverse. To pick one example, the US side might point to the weakness of the banking system, let alone its near-impossible conditions for extending credit to potential investors. These huge problems facing investment in Iraq are also well-known to, and appreciated by, the Minister of Finance, Ali Alawi, and senior civil servants, including those working at the PM Office; and,

4. Petrochemicals and electricity might be priority investment fields from a US perspective, as they might be able to make a swift impact on the domestic market, though this would require dealing with reported corruption within this sector including in the areas of illegal connections to the grid, and contracts awarded for distribution/transmission of electricity. This means that Iraq would need to swiftly deal with the 'deep state' that engenders corruption in this and other sectors of the economy.

Finally, the US side might argue that its support must not be one-sided. It must be reciprocated by effecting tangible changes in the economy and political system, amongst other things. Otherwise 'the potential for investment projects involving world-class U.S. firms in the energy and other sectors' might not proceed.

To survive, it is imperative for any economic/political relationship to be based on some common ground - in this case, a real commitment for change to initiate economic development in Iraq must be demonstrated by Iraq and the U.S. So what would Iraq's government hope to get out of the negotiations?

A likely Iraqi perspective

The Iraqi Prime Minister, Mustafa al-Kadhimi, and the team accompanying him are fully aware of the challenges they face: be they political, economic, social or environmental.

Soon after being appointed, al-Kadhimi set out his 'Government Programme' on May 6th, in which Article 3.1 states that in the short term, the government intends to handle the ramifications of the oil price crises by rationalizing public expenditure and stemming unnecessary expenditure. It also intends to develop the tax and tariff collection system. (see: https://www.pmo.iq/press2020/6-5-202002.htm). The Programme goes on to say (in Article 3.2) that a 'Development and Investment Board' would be established, this will provide a comprehensive plan for investment in infrastructure etc. al-Kadhimi's team might also point out that since his government is fully aware of the weaknesses of the banking system, the CBI (Central Bank of Iraq) has been asked to handle this problem within a specific timescale! Finally, the Programme also points out that a comprehensive reform of the administrative system will be undertaken, youth employment in the private sector will be encourages, etc.

More recently, on August 3rd, al-Kadhimi has pointed out that a 'White Paper' is being prepared dealing with the wider economic issues. His Finance Minister, Ali Alawi, had in several occasions indicated the government's awareness of the problems and promised that these will be dealt with appropriately! (see: https://www.france24.com/en/20200622-without-urgent-reform-iraq-economy-will-face-irreparable-shocks-minister-to-afp).

So the Iraqi side has a number of aspirational objectives to cover in their talks with the American side. They will, however, be well advised to be open about the long term problems Iraq's economy has been suffering from (what is called 'structural problems' to do with the GDP's composition). They should declare their vision/solutions which they might have in mind and the extent to which they think the U.S. side could, in the long-run, assist in transforming/diversifying the economy.

1. One such chronic problem that the Iraq economy has been afflicted with is the historically acute negative balance of trade (when excluding the export of crude oil), as shown in the Figure below.

2. Although inextricably linked to various (structural) aspects of the Iraqi economy, especially the recurrent deficits in the 'Federal Budget', the government might be well advised to bring this issue in the talks with the U.S. This provides a glaring example why it is imperative for Iraq to diversify its economy and why it will need U.S. assistance deploying the 2008 SFA, though the SFA itself might itself need to be reviewed, to be more specific in the capital investment field.

3. The Iraqi delegation might be candid enough to go as far as admitting that the recurring budget deficit is not entirely due to excessive reliance on oil exports, it is perhaps mainly because Iraq hardly exports anything else of high-value-added that other countries might have a comparative disadvantage in and would otherwise import goods/services from Iraq.

4. Now that is has been acknowledged by many experts that both the high rate of increase of Iraq's population and the likely decline in oil prices as it becomes less in demand as an energy source, in the coming few decades, al-Kadhimi's wisdom (or perhaps his survival instinct) might lead him to believe that this is a strategic priority for Iraq, and that if the U.S. is genuine in its desire to assist Iraq, this is where the emphasis should be - rectify the balance of trade (excluding oil) over the next 20-30 years, driven by the private sector with an enabling public sector.

Would al-Kadhimi opt for this direction of travel, and, if he did, will he adjust his thought process to make this the major strategic economic objective for Iraq?

The Joint-Statement

It is anticipated that the 'joint Statement' it issues will be drafted in the most diplomatic, courteous, and respectful manner. It is likely to postulate the existence of good relations between the U.S. and Iraq, with the former offering support and assisting to the Iraqi people to achieve their aspirations in establishing democracy, rule of law, good governance, and alleviating poverty, amongst other things (to be said in the Statement). It will probably acknowledge that the coming months will be critical in deciding the short-to-medium-term events in Iraq, given the depth of the resentment to al-Kadhimi's government in some quarters whose interest are seen to be seriously threatened.

The Joint Statement doubtless will touch on the security partnership, the anticipated elections in June 2021, humanitarian aid, the significant progress made towards eliminating the ISIS threat, over the coming months, etc.

The two sides will reaffirm the 'importance of the strategic relationship and their determination to take appropriate steps to enhance it in the interest of both countries and to achieve security, stability, and prosperity in the region.'

The time-honored dictum, though, will ring loud - that a combination of polity and economics that serves the people will thrive, and so will the country that upholds it. The polity and economics that does not serve the people will soon perish. The long history of Iraq, since early Mesopotamia, provides witness to the truthfulness of this dictum.

Both the current Iraqi and U.S. governments have now a new opportunity to choose one path or the other. We should find out soon!

Please click here to download Dr Hirmis' full report in pdf format.

* Amer K. Hirmis, August 17, 2020

Dr Amer K. Hirmis is Principal at UK-based consultancy CBS Ltd. (2008-present). In October 2009, Amer began a 20-months assignment as Senior Development Planning Advisor to the Ministry of Planning in Iraq (funded under the DANIDA programme for 'peace and reconstruction' in Iraq). The posts Amer has assumed include Chief Economist and Head of Policy at the London Chamber of Commerce and Industry (1992-5), Economic Advisor to UK South West Regional Development Agency (1996-8) and Associate Director and then Head of Consulting and Research (Middle East) at the global firm DTZ (1998 to 2007).

Dr Amer K Hirmis is the author of 'The Economics of Iraq - ancient past to distant future' [https://www.amazon.com/Economics-Iraq-Ancient-distant-future/dp/1999824105] [Chapter 6 of the book is entitled 'Monetary and Fiscal Policies'].

END

[1] (https://www.whitehouse.gov/briefings-statements/statement-press-secretary...-iraq/. The Press Statement was issued on August 7th).

In their June 2020 meeting, the respective teams preparing for the visit jointly stated that "The two countries reaffirmed the principles agreed upon by the two sides in the Strategic Framework Agreement (SFA), as well as the principles in the exchange of diplomatic notes and the letters of the Republic of Iraq to the United Nations Security Council...The United States reaffirmed its respect for Iraq's sovereignty, territorial integrity, and relevant decisions of the Iraqi legislative and executive authorities."  (see: https://www.state.gov/joint-statement-on-the-u-s-iraq-strategic-dialogue/ This was released on June 11, 2020).

 

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By Dr Amer K. Hirmis.

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

Will crashing oil prices mean the collapse of Iraq's economy? No.
Will the Iraqi economy (and people) suffer? Yes, a great deal...

Since the crash in Iraqi oil prices from US$61.0 (per barrel) at the end of January 2020 to US$20.7 by mid-April 2020, a crisis compounded by the spread of COVID-19 virus, political vacuum, failed ethno-sectarian polity, to mention but a few, the country has been grappling with quasi-existentialist questions?

• First, can/should Iraq as a country and an economy continue to be so massively crude oil-export-dependent?
• Second, can/should Iraq continue to have no real control of its economy, given that oil prices/production is overwhelmingly determined by OPEC + and others, operating in the oil global market, rather than sovereign Iraqi decision makers?
• Third, is the current oil prices crisis an existentialist reminder that the economy must be diversified from this point in time onwards in favour of other productive sectors by engaging the private sector in a significant way/scale, which has been undermined for over nearly 60 years now?
• Fourth, given the failed post-2003 (ethno-sectarian) political system, which has severely undermined the 'state of Iraq' in favour of self-serving plutocratic political class, what form of political system should Iraq have instead? What sort of polity would genuinely represent Iraqi people, listen to, and act upon professional independent economic advice, and initiate economic development for current and future generations?

As insinuated above, Iraq, of course, needs to address multiple major, well-recognised, challenges facing it at present: COVID-19 virus; filling the vacuum left by a resigned prime minister and his cabinet; regaining sovereignty as an independent country; reducing unemployment; stopping widespread violence against women, and applying the rule of law against those advocating marginalising women's position in society, economics and politics, alleviating poverty for a third of its population, etc. etc. To this add open interference by other countries in decision-making processes at all levels, undermining sovereignty and the livelihood of millions of Iraqis.

This note, however, focuses, albeit briefly, on the first three questions. Whilst the fourth question is critical in addressing the first three questions, it is outside the scope of this note, and more the province of specialist political scientists and professional politicians.

Please click here to download Dr Hirmis' full report in pdf format.

Dr Amer K. Hirmis is Principal at UK-based consultancy CBS Ltd. (2008-present). In October 2009, Amer began a 20-months assignment as Senior Development Planning Advisor to the Ministry of Planning in Iraq (funded under the DANIDA programme for 'peace and reconstruction' in Iraq). The posts Amer has assumed include Chief Economist and Head of Policy at the London Chamber of Commerce and Industry (1992-5), Economic Advisor to UK South West Regional Development Agency (1996-8) and Associate Director and then Head of Consulting and Research (Middle East) at the global firm DTZ (1998 to 2007).

Dr Amer K Hirmis is the author of 'The Economics of Iraq - ancient past to distant future'

[https://www.amazon.com/Economics-Iraq-Ancient-distant-future/dp/1999824105]

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By Dr Amer K. Hirmis.

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

Public sector investment in Iraq - What strategic priorities for the new Prime Minister?

Iraq is still in turmoil, four months since the Uprising, in October 2019. Meanwhile, Prime Minister (PM) Adel Abdul Mahdi resigned. Muhammad Tawfiq Allawi i has been appointed as PM-designate.

Mr. Allawi has already been rejected by the Uprising, as an affiliate to the failed post-2003 ethno-sectarian political system. Political uncertainty thus continues, and with it investment decisions in the public and private sectors.

Whoever the new PM may end up to be, two key challenges will face him; political and economic.

On the political front, the new PM will need to prove, by action, that he has the will and determination to serve the Iraqi people, rather than bend to ethno-sectarian interests that have shaped politics and the economy post-2003. A system that normalised pervasive corruption, sidelined the rule of law, freedom of thought and expression, peaceful gathering and the right to protest. A system that, inter alia, stalled economic development, leading to high unemployment, and marginalised, if not atomised, millions of Iraqis living in poverty.

On the economic front, the challenges are just as great as the political ones. The new PM will have only the near-term to rise to these challenges – possibly a major review of the current ‘Government Programme,’ the ‘Construction Council’ bill, and various economic “road maps” laid out by the current ‘Prime Minister’s Advisory Committee’ (PMAC), e.g. “vision 2030”, as well as comprehensive institutional reforms. He will need to draw together all these, and more, and produce a short-term realistic, rational and workable economic programme, on which more below.

Simply put, the Uprising anticipates economic reforms that create new jobs, use oil revenues for investment in productive sectors of the economy, across the country and substantially reduces the size of government employment, of which the pay roll easily absorbs over 50 percent of the national budget.

The Uprising also demands early general elections, ushering a process of defragmentation of the allegedly corrupt institutions, and observing good governance and the rule of law, amongst other reforms.

Please click here to download Dr Hirmis’ full report in pdf format.

Dr Amer K. Hirmis is Principal at UK-based consultancy CBS Ltd. (2008-present). In October 2009, Amer began a 20-months assignment as Senior Development Planning Advisor to the Ministry of Planning in Iraq (funded under the DANIDA programme for ‘peace and reconstruction’ in Iraq). The posts Amer has assumed include Chief Economist and Head of Policy at the London Chamber of Commerce and Industry (1992-5), Economic Advisor to UK South West Regional Development Agency (1996-8) and Associate Director and then Head of Consulting and Research (Middle East) at the global firm DTZ (1998 to 2007).

Dr Amer K Hirmis is the author of ‘The Economics of Iraq – ancient past to distant future’

[https://www.amazon.com/Economics-Iraq-Ancient-distant-future/dp/1999824105]

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The Iraqi Economists Network (IEN) has just published a new report from our Expert Blogger Dr Amer K. Hirmis:

Mudher M. Saleh’s testimony re: the appreciation of Iraqi Dinar in 2006-8, raises serious questions?

The purpose of this note is to shed light, and comment, on two views expressed recently in relation to the appreciation of the Iraq Dinar (IQD) in 2006-2008.

Muhammad Tawfiq Alawi (henceforth M. Alawi), former minister of communications in Iraq, gave a talk on December 13, 2019 in Washington D.C. to an Iraqi audience, in which he mentioned the appreciation of the Iraqi Dinar (IQD) during 2006-2008 as an example of lack of economic planning in Iraq.

Mudher Muhammad Saleh (henceforth M. Saleh), former deputy governor of the Central Bank of Iraq (CBI), and currently finance advisor to the outgoing prime minister, responded the following day, in an article published at the ‘Iraqi Economists Net.’

This note focuses on two observations, set out below:

Firstly, that the “independence” of the CBI was compromised in negotiating and signing a ‘Stand-By Agreement’ with the IMF in late 2005.

Secondly, by following the IMF programme in Iraq, the CBI’s administration focused its attention on limited instruments of monetary policy as dictated by the IMF, and much less on contributing to national economic growth and leveraging badly needed major structural changes in the economy.

Read Dr Hirmis’ full report here.