Custom Search

By John Lee.

The Government of Iraq has issued an English-language summary of its recently-approved white paper on economic reforms:

The Iraqi government has formally adopted the White Paper for Economic Reforms prepared by the Crisis Cell for Financial and Fiscal Reform.

The White Paper seeks to put Iraq's economy on a path that allows the state to take appropriate steps in the future to develop it into a diversified, dynamic economy. Dr. Ali Allawi, Deputy Prime Minister and Minister of Finance

The White Paper is a comprehensive programme that sets out a clear roadmap to reform the Iraqi economy and address the accumulated, decades-old serious challenges that confront it.

Iraq's Deputy Prime Minister and Minister of Finance, Dr. Ali Allawi said that the White Paper seeks to put Iraq's economy on a path that allows the state to take appropriate steps in the future to develop it into a diversified, dynamic economy that creates opportunities for citizens to live a decent life.

And although the current severe fiscal crisis that Iraq is going through is related to the recent sharp decline in oil prices and to the repercussions of the Coronavirus pandemic, the White Paper makes it clear that the causes of Iraq's economic and financial woes date back several decades.

The White Paper identifies the expansion of the role of the state as a key cause of the crisis.

The roots of the crisis

The White Paper provides a detailed outline of the factors that have distorted the Iraqi economy, undermined its capacity to provide a decent life for large number of Iraqis, and its failure to keep pace with the economic developments that the world has witnessed.

The expansion of the role of the state

The White Paper identifies the expansion of the role of the state and emergence of a command economy in Iraq as a key cause of the crisis.

From the nationalisation of vital economic sectors in 1970s, to the commandeering of all economic levers by the state to support the war effort in the 1980s, through the period of  sanctions imposed on Iraq in the 1990s, these shocks, as well as the absence of strategic planning, mismanagement, maladministration, patronage and misguided political ideology, all led to an expansion of the role of the state in all aspects of economic life in Iraq.

The Iraqi economy continued to be directed by the state after the events of 2003 because of the failure of the new political system to create a free and diversified modern economy as outlined in Iraq's Constitution, and instead continued to rely on the state as the almost only driver of economic activity in the country.

The expansion of the role of the state, and the associated increase in the number of those employed in the public sector and the cost to Iraqi exchequer of their salaries and pensions, came at the expense of the government's ability to invest in basic infrastructure in Iraq.

To illustrate the point, the White Paper points out that from 2004 to 2020, state expenditure on the salaries of civil servants and on public sector pensions increased by 400% in real terms, as the total number of public sector workers during the same period increased by threefold.

The cost of salaries and pensions of public sector workers is expected to be around 122% of Iraq's oil revenue in 2020. The White Paper for Economic Reforms

And between 2006 and 2018, average public sector salaries increased by 134%, more than the increase in labour productivity, which rose by only 12%, or the cost of living, which rose by 28% during the same period.

Over the past 17 years, government spending on the salaries of state employees, and on public sector pensions became the fastest growing expenditure item in Iraq's successive federal budgets during this period.

There are currently around 4,500,000 public sector employees and 2,500,000 pensioners.

Decline of the private sector

The expansion of the state's role, in addition to the complex administrative system and the state's weakness in imposing the rule of law, the militarisation of society, and the influence of non-governmental actors in public institutions, led to the decline of the Iraqi private sector.

With the exception of a number of small and medium-sized companies operating in the oil and telecommunications sectors, and very small companies operating in the fields of trade, retail, transport, construction, hospitality and textiles, there is almost a complete absence of private sector companies in manufacturing.

In addition, most of the larger private sector companies depend on providing services to the state and on government contracts.

The White Paper also identified other factors that led to the deteriorating economic situation in Iraq is, most notably:

• The collapse of oil revenues
• The impact of Covid-19
• Mismanagement and lack of planning
• The weakness of financial institutions
• The absence of modern coherent systems for managing state revenues
• An ineffective and outdated banking sector
• Complex and antiquated government procedures
• Destruction of infrastructure and the costs of the war against Daesh terrorists

Two strategic goals 

The White Paper identifies two overarching strategic objectives.

1. The first is to initiate an immediate reform programme to address the budget deficit to create a fiscal space to give time for the process of implementing the other wider reforms over the medium term.
2. The second objective is to put the economy and the federal budget on a sustainable path, after which Iraqis can decide and choose the economic direction of the country.

The White Paper anticipates that the short and medium-term objectives and associated reforms will require between 3 to 5 years to implement.

The reform pillars

The White Paper identified five key pillars for the reform programmes:

1- Achieving sustainable financial stability

Key reforms include:

• Reducing the deficit from 20% to 3% of GDP and expenditure on salaries from 25% to 12.5% of the federal budget
• Collecting electricity tariffs from all users based on the real price of fuel on global markets
• Recovering and returning Iraq's smuggled and stolen money
• Increasing revenues from customs and taxes
• Reforming Iraq's Pensions Fund and move to gradually end federal budget support
• Reforming financial management systems
• Reviewing the current exchange rate of the dollar against the dinar

2- Implementing strategic reforms and creating sustainable job opportunities

Key reforms include:

• Modernising and rehabilitating the financial sector
• Modernising and rehabilitating the banking system, supporting the development of private banks, reforming government banks and introducing and activating the Core Banking System in Al-Rafidain and Rasheed Banks
• Expediting the development of e-banking services
• Establishing new trading markets, such as a commodity market and a currency exchange market (Forex)
• Supporting the sectors that drive the economy, such as agriculture, oil and gas
• Introducing a private sector support fund, simplifying procedures, and providing other non-financial aid
• Creating job opportunities in the private sector and supporting small and medium enterprises
• Adopting a national strategy for education and training that links educational outcomes with the future need for the labour market

3- Improving basic infrastructure

Building Iraq's digital infrastructure is a key aim of the White Paper.

Key reforms include:

• Increasing the effectiveness and improving the performance of all parts of Iraq's electricity sector
• Developing Iraq's digital infrastructure, including the introduction of advanced technology (4G) at the beginning of next year, and preparing for the introduction of (5G) technology
• Modernising the legal and regulatory framework of the transport sector, and encourage private investment in transport
• Developing industrial cities and free zones in Iraq

4- Providing basic services and protecting vulnerable groups during and after the reform process

The reforms aim at establishing a unified and financially sustainable pension system for all Iraqis whether they are working in the public, private, cooperative or mixed sector. The White Paper for Economic Reforms

Key reforms include:

• Improving water supply for both drinking and irrigation and complete sanitation projects and networks
• Building 1,000 new schools during the period of the reform programme
• Reforming the social security system
• Establishing a unified and financially sustainable pension system for all Iraqis whether they are working in the public, private, cooperative or mixed sector
• Completing and implementing the draft health insurance law to ensure that all Iraqis have access to essential health services

5- Improving governance and introducing changes to the legal framework to enable institutions and individuals to implement reforms

• Reviewing and amending the official guidance in relation to government contracts
• Introducing e-governance systems to strengthen oversight of government contracting and the collection of taxes and customs
• Working with specialist investigative international organisations to return the large sums of money smuggled out of Iraq
• Introducing an electronic governance system in the field of government contracting and tax and customs collection
• Completing the project establishing the National Information Centre to facilitate the introduction of government e-services to citizens, and automate the procedures for obtaining key documents  such nationality and passports and accessing pensions and social security
• Introducing electronic signature and transactions throughout the public administration system and phasing out paper transactions

A detailed implementation plan of White Paper will be published later to outline the required process, identify key stakeholders and establish timelines and monitoring mechanisms.

Click here to download the full white paper (Arabic only)

Click here to read analysis from Ahmed Tabaqchali

Click here to read analysis from Ali al-Mawlawi.

(Source: Govt of Iraq)

From the Iraq Britain Business Council (IBBC).

Why IBBC Autumn conference will be different and full of promise: Opportunity in Adversity

To be honest, the idea of holding a conference in the year of COVID, might look fool hardy, but sometimes you have to face down challenges and move forward, just like the Government of Iraq is doing. There is no more important time to look to the future to overcome challenges and to equip yourself with insights, intelligence and new relationships that can make the all the difference to your future business.

Iraq has had its fill of challenges, but has navigated them with a formidable resilience, and now finds itself with a Government that is measured, determined and actively promoting the country, while walking a delicate line between geo politics and a subdued oil price.

On 19th November, IBBC is hosting many of the key companies and officials who make decisions on Iraq's future business. We know the Iraqi deputy minister for Electricity, the KRG Minister for Trade and the UEA Under Secretary Foreign Trade and Industry will be present, but we are also confident other significant Iraqi minsters are likely to attend, and our leading members, including BP, Shell, Siemens, GE and International Islamic bank- and many more, will also be speaking and attending.

Now is a great opportunity for change and we believe Iraq won't let the opportunity go to waste. Iraq is at a critical inflection point and the Government understands the importance of encouraging the private sector as a vehicle to solving investment, jobs and diversifying the economy at this time, which is why we are expecting a strong attendance from members and speakers alike from sectors crucial to Iraq's future : Energy, Infrastructure and Logistics, Finance and Tech. On the Tech front speakers from The World Bank, Mastercard, Zain cash will discuss Digitising Iraq and Online consumer behaviour and expectations, in Infrastructure, Basra Gateway, Garda world and G4S join the discussion, and in Finance, we are hosting investor experts including Capital Bank, Belle Finance, Stirling Education and Management Partners.

While IBBC works for it's members, the conference is open to all interested parties, to meet, share and exchange business contacts at the Address Hotel, Dubai Marina, and find the opportunities that adversity brings. As we look to the coming year, we see a Government making good decisions, investing in large projects, understanding the importance of diversifying its economy and also providing work and opportunity to its young population.

Now is the time to turn up, attend and make plans for the future of Iraq, and we look forward to welcoming you.

Please register here:

https://iraqbritainbusiness.org/event/ibbc-autumn-conference-at-the-address-hotel-dubai-marina

From the Iraq Energy Institute (IEI). Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

For Q3 2020, our first non-oil economy part examines Iraq's current challenges and economic potential at the macro and micro level. With the oil economy review, there two reports provide a detailed overview of developments in oil and gas, agriculture, industry, electricity and health, looking at Iraq's key vulnerabilities amid the COVID-19 crisis and where Iraq has received substantial international assistance.

Here we examine Iraq's current policy options, however limited, and prospects for stabilisation, in light of the new white paper on economic reform presented by the Iraqi cabinet on 13 October.

Additionally, we look at Iraq's continuing policy of trying to balance regional relations during a time of renewed proxy conflict, the regionally shared challenge of collapsed oil prices and the global pandemic.

Iraq's policy of regional outreach is finally starting to show positive results but remains vulnerable to the rapidly shifting geopolitics of the region. Arising from Baghdad's regional posture, we examine some of the most interesting developments, particularly in the energy sector.

Click here to read the full story.

By Luay al-Khatteeb, for Foreign Policy. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Iraq's Future Isn't Oil, It's Sustainable Electricity

As the country continues to grapple with the aftermath of the Islamic State insurgency, revolutionizing the country's energy sector could be the key to long-term security.

Click here to read the full story (subscription required).

The Governor of the Central Bank of Iran has said his negotiations with Iraqi officials have yielded "positive" results, as the Arab country has given its approval to the release of Iran's frozen assets for the purchase of basic commodities.

In remarks on Monday, Abdolnasser Hemmati said he held a trilateral meeting with Governor of the Central Bank of Iraq (CBI) Mustafa Ghalib Mukheef and Chairman of Trade Bank of Iraq (TBI) Salem Jawad Abdul Hadi Al-Jalabi during his visit to Baghdad.

The Iraqi authorities have agreed to release Iran's frozen funds for the purchase of basic commodities after extensive talks on trade exchanges, Hemmati said, noting that the Islamic Republic of Iran holds remarkable financial sources in Iraqi banks earned by the export of electricity and gas.

Under the new agreement, the main obstacle to the release of Iran's assets in the executive sphere has been removed, as the Central Bank of Iraq and the TBI face no more restrictions, he added.

Hemmati also pointed to his meeting with Iraqi Prime Minister Mustafa al-Kadhimi following the tripartite negotiations with the bank authorities, saying the Iraqi premier has hailed the agreement on the release of Iranian assets and promised to pursue the implementation of the deal on a weekly basis.

The top Iranian banker expressed hope that the new deal with Iraq would result in positive steps in the promotion of economic and banking interaction between the two "friendly and brotherly" neighbors.

The assets held in Iraq belong to the Central Bank of Iran, which is the main supplier of the basic demands in various sectors such as industry, agriculture and healthcare, he explained, saying Tehran would begin to withdraw money from those funds according to its needs, the government's official website reported.

The commodities that are categorized as basic needs are exempted from the cruel and unilateral sanctions imposed by the US, the Iranian official noted.

(Source: Tasnim, under Creative Commons licence)

The Iraqi Cabinet held an extraordinary meeting in the city Nasiriyah in Dhi Qar province on Monday under the chairmanship of Prime Minister Mustafa Al-Kadhimi.

At the start of the meeting, the Prime Minister said that the people of Dhi Qar had sacrificed much for Iraq, but they have suffered from the consequences of past marginalisation. He affirmed that this government is determined to address the challenges facing the province.

Following discussions, the Cabinet approved several measures to improve services and boost investment in Dhi Qar, including:

• Establish Dhi Qar Reconstruction Council to oversee the implementation of key projects in the province
• Establish a working group to review all delayed and incomplete projects in Dhi Qar to ensure that work on these projects is resumed, giving a priority to projects that have direct impact on the lives of citizens. The working group will be chaired by the Secretary-General of the Council of Ministers, with the membership of the Governor of Dhi Qar, the Deputy Minister of Planning, the Deputy Minister of Construction, Housing and Municipalities, and representatives from the Ministries of Finance, Electricity, Oil and Education
• Grant the Governor of Dhi Qar the necessary powers to oversee the construction of new roads, rehabilitation of water purification plants, and the rehabilitation and maintenance of hospitals and health centres
• Direct the Ministry of Oil to allocate 500 million dinars annually to the Heart Centre in Dhi Qar and to the local Health Department
• Direct the Ministry of Communications to allocate 10 billion dinars to Dhi Qar
• Direct the Ministry of Health to provide hospitals in the province with medical equipment and supplies
• Direct the Ministry of Education and Scientific Research to follow up on the progress of Al-Shatra University Project which was established in 2013
• Direct the Agricultural Bank, the Housing Fund and the Industrial Bank to simplify the procedures for granting loans to the people of Dhi Qar because of the exceptional circumstances facing the province
• Expedite the completion of Dhi Qar Industrial City and Dhi Qar Refinery
• Expedite the construction of school buildings and hospitals with a high completion rate

The Cabinet also approved several technical and administrative measures related to Dhi Qar aimed at delivering tangible and rapid improvement across a number of key public services.

(Source: Govt of Iraq)

By Joe Snell for Al Monitor. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

New Iraqi committee to build nuclear reactors, combat electricity woes

Iraq's Prime Minister Mustafa al-Kadhimi ordered on Sept. 24 the formation of a committee tasked with overseeing the building of nuclear reactors for research purposes, according to the Iraqi Commission for Control of Radioactive Sources.

Click here to read the full article.

By John Lee.

On Sunday, Iraq and Jordan reportedly signed a contract to connect their electricity networks and sell electrical energy between the two countries.

According to INA, the deal will see Jordan providing Iraq with 1000 gigawatt hours per year as a first stage.

The 300-km line will connect the new Risha substation, currently under construction in Jordan, to the al-Qaim substation in Iraq, with a length of about 300 km, with work to be completed within 26 months.

(Source: INA)

By John Lee.

The United States has reportedly granted Iraq a 60-day extension to a sanctions waiver allowing it to import Iranian gas.

According to the report from AFP, Iraq relies on gas and electricity imports Iran to supply about a third of its electricity sector.

More here.

Iraqi Government and Oil and Gas Industry Thought Leaders to Speak at Iraq Petroleum Virtual Event

• Annual Conference set to navigate the future of the oil and gas industry in Iraq
• Conference will include online conference sessions available live and on demand for all attendees
• Delegates will gain insights into the latest policy and project announcements in the oil and gas sector in Iraq as well as the key recovery strategies post pandemic
• Virtual Event will take place on 20 - 21 October through an interactive platform

CWC and Global Future Energy's Iraq Petroleum Virtual Conference will include 6 content-rich panel sessions, enabling the oil and gas industry stakeholders to connect and engage with each other virtually to address current issues and facilitate practical solutions to advance the industry in these challenging times.

The Iraq Petroleum Virtual Conference constitutes of Ministerial Panel, Leader's Session, a Spotlight Session on Kurdistan Iraq Economic Relations and executive panels delivered by thought industry experts. The conference will provide exclusive information, maps and updates on unrivalled opportunities and upcoming projects.

Iraq Petroleum attendees will gain all necessary tools to swiftly adapt their businesses to the post-lockdown environment. In light of the unprecedented circumstances and arising opportunities, the decision-makers and influencers from across the industry will get together to unlock new business opportunities on all levels of the energy industry at Iraq's most-established and longest-running energy event, the Iraq Petroleum Conference, and discuss:

• Iraq's potential as a game changer in the global energy markets; how could Iraq reach its full potential?
• How could Iraq build a new breed of NOC-backed by trading houses?
• How could Iraq expand its crude oil market beyond the current buyers?
• Iraq's next chapter of upstream investment: How to reform Iraq's upstream service contracts; what is the way forward?
• Post pandemic lessons: How to accelerate the digital transformation of Iraq's energy sector?
• Iraq's Electricity: Revolutionizing the Industry; What are Iraq's priorities post pandemic?
• Do International Oil Companies plan to build portfolios in Iraq through investments in various parts of the value chain?
• What are Iraq's projected gas plans in 2020-2030?

Over the past decade, the CWC Iraq Portfolio has hosted over 100+ Ministers and Senior Officials at various events. Now in its 14th year, Iraq Petroleum will again provide the only platform for oil and gas stakeholders in Iraq to convene. These high-calibre events are held with the support and participation of the new Federal Iraqi Government, the Federal Ministry of Oil, Federal Ministry of Electricity, the Iraqi Federal Parliament, REFAATO as well as considerable sponsors including Lukoil, Mitsubishi and ILF.

Speakers will include:

1. HE Ihsan Abduljabbar Ismaael Al-Saade, Minister of Oil, Federal Government of Iraq
2. HE Nafaa Abdulsada Ali Al-Hmidawi, Senior Deputy Minister, Ministry of Electricity, Federal Government of Iraq
3. Matthew M. Zais, PhD Principal Deputy Assistant Secretary, Office of International Affairs, US Department of Energy
4. HE Matthew H. Tueller, U.S. Ambassador to Iraq, United States Embassy, Iraq
5. Husam Hussein Weli, Director General, South Refineries Ministry of Oil, Federal Government of Iraq
6. Dr Khalid Al-Yaqoobi, Director General, President of Iraq Office, Iraq Presidency, Federal Government of Iraq
7. Egor Zubarev, Managing Director, LUKOIL Mid-East Limited
8. Zaid Elyaseri, Head of Country, BP Iraq

For further information, visit https://www.cwciraqpetroleum.com/

To access the full programme, please click here.