Experts Discuss IBBC's 'Iraq 2020: a Country at the Crossroads'
Posted on 17 June 2020 .
IBBC Advisory Council's discussion goes public on the white paper 'Iraq 2020: a country at the crossroads.'
Today over 300 people signed up the IBBC Advisory Council's public discussion on the white paper - Iraq 2020: a country at the crossroads, sponsored by Iraq Business News ( IBBC media partner) and in conjunction with Chatham House and IRIS at AUIS.
With a full panel of 6 advisors and commentators, including Ms Maya Gebeily of Agence-France Presse, Mr Ahmed Tabaqchali of IRIS at AUIS, and the key advisory panel members led by Professor Frank Gunter of Leigh University, Dr Renad Mansour, Fellow at Chatham House, Mr Hani Akkawi of CCC and Professor Mohammed Al-Uzri, University of Leicester University. Mr Christophe Michels, MD of IBBC chaired the discussion.
The key points were delivered by Professor Gunter, including, the necessity to provide: 1. Strong cross-party political support to GOI for its initiatives; 2. Transparency to build support and trust among the people and to stop corruption up and down the system. 3. GOI acceptance of the limits of its ability to control and centralise economic activity- and afford to make space for the Private sector.
Dr Mansour made critical points about the importance of the political economy and the requirement to listen and understand the needs of the protestors and conversely the protestors ability and requirements of government to make changes, along with the difficulty in enacting reforms while the public sector has too much invested in its continuation.
Mr Hani Akkawi, made an unmissable point about the opportunity for areas of industry to be returned to the private sectors, such as electricity, water, fertiliser and transport, that would not only raise finance, but help efficiency and productivity.
Underpinning the report are 5 key action points and a further 38 recommendations that the GoI may be able to make to address the economic crisis that faces the country, including; business deregulation, inclusion of the informal business sector into legal acceptance, ending subsidies on electricity and water production, am improved banking system with credit for private sector businesses, an anti-corruption drive and dealing with COVID-19 without jeopardising the private sector.
Please see the full webinar here
Click below to read the full paper:
Iraq 2020: a country at the crossroads - English
Iraq 2020: a country at the crossroads - Arabic
For further information please contact [email protected]
WEBINAR PARTNERS:
Posted in Investment, Iraq Industry & Trade News, Politics Comments Off on Experts Discuss IBBC's 'Iraq 2020: a Country at the Crossroads'
Swedish Company to build Power Substations in Iraq
Posted on 11 June 2020 .
By John Lee.
Linxon Sweden AB has signed a contract with the Iraqi Ministry of Electricity to build 132-KV power transmission stations in Baghdad, Kut and Diwaniya.
The contract was signed in Stockholm in the presence of the Ambassador of the Republic of Iraq in Stockholm, Mr. Ahmed Al-Kamali.
Linxon is a joint venture company set up by SNC-Lavalin and ABB to deliver turnkey electrical AC substation projects.
(Source: Iraq Ministry of Foreign Affairs)
Posted in Iraq Industry & Trade News Comments Off on Swedish Company to build Power Substations in Iraq
Tabaqchali: Making Space for the Private Sector
Posted on 06 June 2020 .
The Iraq Energy Institute (IEI) has published an interview with Dr Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund; it is re-published with permission by Iraq Business News:
In the latest instalment in our series on sustainable job creation in Iraq, we spoke to Ahmed Tabaqchali, visiting fellow at the American University of Sulaimani's Institute of Regional and International Studies (IRIS). Mr. Tabaqchali is also CIO of Asia Frontier Capital's Iraq fund and Board Member of the Credit Bank of Iraq. Additionally, he has decades of experience in finance, having also worked with the National Bank of Kuwait's investment arm.
In our last interview, we spoke with World Economic Forum contributor and distinguished economic historian Ewout Frankema, who discussed the role of the state in job creation.
This month we take a different tack and hear Mr.Tabachali's views on the role of finance and markets, Iraq's early efforts mobilizing financial technology (FINTECH) for the unbanked and kickstarting small and medium-sized enterprise (SME) growth.
AT: In terms of strategy, everything the new government will have to do has to go through parliament, including accessing foreign loans and reforming the public sector. When it comes to Iraq it is not a question of how strong the institutions are or how competent individuals are, it is a question of passing this through parliament with all of its political fragmentation, between the different pollical parties and within each party between its leadership and members, all of which makes reaching a consensus to embark on real, and thus difficult, reforms very hard. However, the scale of the crisis, brought by COVID-19 both socially and economically, might act as a catalyst for real change.
What is the current risk with having so much of the hiring in the public sector and what might be done to minimise this problem?
AT: Some things have to be done now that are comparatively easy and have been done in the past. Ad hoc measures such as freezing new hiring, cutting staff through attrition, putting a cap on benefits and letting this cascade through every department. This worked last time to a limited extent. But these changes are small scale, easily reversible and they do not solve the wider problem.
One problem is that you cannot have every ministry manage its own human resource processes, there is a need to have a central human resource structure. One course of action could be to separate benefits from salaries and link them to performance. This may sound horrendously complicated but on the public sector side, there is a little alternative. I don't subscribe to the idea that this is a crisis that will pass, it is a multi-year crisis, a lot of oil demand will come back, but I cannot see a recovery anywhere near the pre-COVID situation.
Iraq is now not only battling a difficult internal situation but a weakened global economy. We are not just talking about a major disaster in one sector only. Consider such effects on hospitality and tourism; that will affect entire countries dependent on tourism, and then consider the knock-on effect on other sectors: what does that do to worldwide aggregate demand? What does that mean to Iraq? It means that oil prices will recover but they won't be anything sustainably higher than $50 or $55. This points to the need for a complete change in mentality within the Iraqi governing elite and indeed, society at large.
Within Iraq, the government has very limited space to manoeuvre. If you look at Central Bank data on bank lending to the government and on T-Bill issuance, we survived in 2014-2017 through using reserves, via indirect monetary financing, and government bank lending. But while some of that has been paid off, CBI data as the end of November 2019 show that total domestic debt has increased to the prior crisis' peak. So, I cannot see that being repeated, not in the same way as then. This time, I struggle to see the state banks' lending beyond a few billion. The reserves are there but not un-limited and then there are conditionality constraints on any upcoming IMF loans. So, there will be no waiting out this crisis, there has to be decisive reform.
What danger is there to the SME sector, in terms of constrained available credit from banks, given this lending is important for start-ups?
AT: For the private sector banks, if you look at the end of 2018's data, there is something like a $9 bn deposit base, 70% of which is in current accounts, so they can't lend more than one-third of this, maximum. So, you can't look to the private sector for state loans. That leaves the state banks, and they are so undercapitalized, burdened by un-resolved legacies of the prior regime, they function by a miracle or by pushing the accounting rules' envelope. For example, you have an asset that is no longer a creditworthy asset, but you leave it on the books without making realistic downward adjustments to its value and without taking sufficient provisions. So that room for manoeuvre is very limited. Iraq has the foreign deposits at the Ministry of Finance, there is about $6bn there so there are some available funds here and there to meet immediate needs, but how far will you go with that? The need for the state to access domestic debt will eventually place restrictions on available funds for the SME sector.
Iraq is sliding towards a danger zone, a crunch point with foreign reserves where there is a risk of currency devaluation.
AT: Yes. And one problem here is that the last government, to appease the October demonstrations, hired additional employees and lowered the retirement age, adding at least another $6bn to the salary and pensions outlay which is now baked into the current budget. So, the $44bn in salaries and pensions in 2019, is more like $50bn for 2020. Similarly, the $73 bn spent on current expenditures, which also includes transfers to SOE's, social security and subsidies for fuel and energy, is now more like $80 bn in current expenditures. How much can you cut from that without real restructuring?
So Iraq is facing an emergency situation to mobilise the private sector and there is a risk state banks may have limited room for lending to SMEs. One thing Iraq can do perhaps is maximise export finance and partnerships with foreign banks for SME lending, such as the recent scheme with Commerzbank. And of course, the Iraqi government has its own fund for this, the One Trillion Dinars initiative.
AT: There is no doubt that these initiatives are vital for new business ventures. The issue is structural impediments that are limiting these schemes. Access to finance is very crucial for start-ups to work, but in order for these organizations to operate you need to remove the stifling regulatory environment. The arbitrary nature of taxes, the expenses involved in just setting up and the many bureaucratic steps required to get started. So at the moment many of these start-ups are informal. The only way for these schemes to work is for them to start in the informal sector.
But they can't make the transition to formality because the process to attain that status is so complicated and expensive, to start and to maintain. We always talk of mobilizing the private sector, but we are throttling it on a daily basis. Look at the UAE for example, they have the Free Zones, a very low time required for company registration, but with Iraq it is a stifling number of procedures.
The solution as far as the Iraqi government are concerned sadly seems to be another level of bureaucracy. In order to mobilise more start-ups, the government following the October demonstrations allowed for 18-35-year-olds to have fast-track separate set of regulations for start-ups in certain industries. So, the same bureaucracy will handle two parallel categories. You open up the door for even more corruption with more bureaucracy.
Every country, of course, has bureaucracy. But we have absurd requirements on top of the usual. Even just very small things, like paying a bill, can be a nightmare. And this is the legacy of formal socialism.
You are saying that in Iraq, socialism is not simply a term to be used as a political label, it is a word that is formally used in laws that are still on the books from decades ago.
AT: That's right. So what Iraq needs is a change in the political economy. Look at the informal sector -it is mostly in retail, such as hawking goods, and in hospitality such as restaurants, and not in productive sectors. It's informal because it is so expensive to start up formally. Change the regulations so it is more like the UAE, give them a year's amnesty before you implement a much easier, formal registration process. These businesses hide because the only way they can operate is by bribing various officials. An amnesty would free them from harassments and un-necessary expenses during the transition to sensible regulations. The government needs to do something that is drastic, and very different from the past, to mobilise the private sector.
You can't have a top-heavy, authoritarian socialist bureaucracy creating jobs or opening up the private sector. During the Kuwait conference, Iraq's National Investment Commission came up with the One-Stop-Shop initiative - more bureaucracy on top of the bureaucracy. Why not follow the Kurdish Region of Iraq's approach? Just get a visa on arrival for certain nationalities. That is the direction we need to be going in.
There has been a growing relationship between telecoms and banks in Iraq to provide services such as mobile wallets. Some of it is Iraqi initiative, some of it is fostered by development agencies. Perhaps one danger now is that if public sector payments are digitized, the salaries are still in jeopardy. How important have these FINTECH developments been?
AT: This is where we will see a lot of growth and excitement. One barrier to further progress is not technological. We have decent internet so the issue is firstly, we need to increase the number of areas where these innovations can be used. Right now they are quite limited. I am thinking of using a mobile e-wallet but I have to go to an official shop in town and register, supply the required set of documentation, and once you use it, the places you can use it in are rather limited. A part of the potential in this technology is that it will make it difficult to cover up small scale corruption, which is easy with cash. But there is still a chicken and egg situation in terms of outlets where e-wallets can be used.
So we could say in the long run, the public demand for convenience may crowd out the demand for corruption?
AT: Yes, and in the long run, it can have a huge effect on the "unbanked" and that will have huge potential for job creation. I have some relatives in government who started receiving their salaries through their banks, and their usage followed the same patterns seen by those in the private sector who were provided with Bank cards as I learned from speaking to bankers. At the beginning where there was an ATM when salaries were dispersed the ATM would just empty as people used it as a cash-out outlet. But in time they started leaving money in the bank and starting using the cards for making purchases. So, the cards have been extremely useful in the transition away from cash.
Similarly, for the government's initiative when the card/ e-wallets were linked to a Mastercard, people started keeping some funds on the card. In the process they were creating deposits, giving the bank the ability to lend as these deposits grow and become sticky. So, there is convenience and value there, and that could spark wider financial development. But there needs to be a bigger deposit insurance scheme in banks, more than the very small $25,000-dollar limit recently introduced. But in the long term, this is extremely exciting. And these are the reforms that need to be pushed, and they should be COVID-inspired reforms because this is how Iraq gets out of its nightmare.
Would you say then, this is not about what the government needs to do but in some ways, about what the government should not do?
AT: I agree although of course there is a vital role for the government in general. The government should ensure there are law and order. Without that, a business cannot run, they need reliable mechanisms of exchange, debt and credit, and the enforcement of contracts. That is only done through law and order. It doesn't have to copy a Western model either, but what is needed is the monopoly of violence by the state, and its monopoly to enforce the law, i.e. when rules of the game are predictable, enforceable, and applicable to all. Other competencies of the government are in infrastructure. Roads and electricity are enablers, as well as education and healthcare. Healthcare is a great equalizer, at least with decent healthcare you are helping the most vulnerable, and in the process building the state's legitimacy. And if the government focuses on these and opens up the private sector, it will flourish.
(Source: IEI)
Posted in Investment Comments Off on Tabaqchali: Making Space for the Private Sector
Iraq Signs 2-Year Electricity Import Deal with Iran
Posted on 04 June 2020 .
Iran signed an agreement on exports of electricity to neighboring Iraq, covering 2020 and 2021.
The two sides signed the agreement during a visit to Baghdad by Iran's Minister of Energy Reza Ardakanian, stressing their determination to broaden cooperation in the energy sector, despite American pressure on the Iraqi government to reduce economic ties with its neighbor.
Ardakanian in an interview highlighted the achievements of his one-day visit to Baghdad, where he signed the contract with the Iraqi Electricity Ministry.
The new agreement, he said, covers 2020 and 2021, while the previous deals had lasted for one-year periods.
He said Baghdad paid Tehran about $400 million - half of Iraq's due debts to Iran for electricity supply - thanks to the Iranian Embassy's follow-up efforts in the Iraqi capital.
The minister also noted that he discussed with Iraqi officials a three-year cooperation plan earlier signed between the countries' private sectors to reconstruct Iraq's electricity industry.
He further announced plans for a visit by Iranian technical teams to Iraq next week to pen two important agreements on reducing power grid losses and repairing electricity equipment, according to Press TV.
Heading a delegation of electricity experts, Ardakanian visited Iraq on Wednesday and held meetings with senior officials, including Prime Minister Mustafa al-Kadhimi, President Barham Salih and Electricity Minister Majid Mahdi Hantoush.
The Iraqi Prime Minister's office said in a statement that Kadhimi had, in his meeting with Ardakanian, stressed Baghdad's willingness to develop the best of relations with its neighbors.
The two sides exchanged views on cooperation opportunities in the energy sector and boosting bilateral ties between the two neighboring states, according to the statement.
Kadhimi also underlined the need for maximum efforts to resolve complicated problems gripping the region.
Separately, the Iraqi president's office released a statement on Ardakanian's meeting with Salih, saying the latter called for bilateral interactions, especially in the fields of electricity and water.
The two officials, the statement read, also explored ways to enhance bilateral relations in all sectors in line with mutual interests.
Iraq and Iran share a 1,400-kilometer-long border. Except for gas and power, Iraq depends on Iran for everything from food, fruits and vegetables to machinery and home appliances.
Iranian energy accounts for between 30 and 40 percent of the electricity consumed in Iraq.
Over the past months, Washington has been pressing Baghdad to stop buying natural gas and electricity from Tehran as part of its "maximum pressure" campaign aimed at choking off Iran's revenue.
Illegal US sanctions are preventing Iran from repatriating its money.
Last month, Iraq's former electricity minister Luay al-Khatteeb said Iran will remain a key source of energy to the Arab country for years to come until suitable alternatives materialize.
(Source: Tasnim, under Creative Commons licence)
Posted in Construction & Engineering In Iraq Comments Off on Iraq Signs 2-Year Electricity Import Deal with Iran
Iranian Minister in Iraq for Talks on Energy Cooperation
Posted on 03 June 2020 .
Iran's Minister of Energy Reza Ardekanian has paid a visit to Iraq for talks on energy cooperation.
During his trip to Baghdad, Ardekanian will hold talks with his new Iraqi counterpart and the other senior officials of the Arab country to weigh plans for the promotion of cooperation in the electricity industry.
The Iranian and Iraqi energy ministers are expected to discuss the expansion of Tehran-Baghdad cooperation in the energy industry, a plan to synchronize the power grids of Iran and Iraq, the training programs, and development of the electricity networks of the two neighbors.
In a ceremony in November 2019, Iran connected its national grid to Iraq.
Power cuts in Iraq have often prompted protests against the authorities. Iran supplies enough gas to power 2,500 megawatts (MW), as well as providing Iraq with 1,200 MW in direct power supplies.
(Source: Tasnim, under Creative Commons licence)
Posted in Iraq Industry & Trade News Comments Off on Iranian Minister in Iraq for Talks on Energy Cooperation
Covid-19: Iraq Extends Nationwide Curfew
Posted on 01 June 2020 .
Prime Minister Mustafa Al-Kadhimi chaired on Saturday a joint meeting of the Higher Committee for Health and National Safety and the parliamentary Covid-19 crisis cell.
At the start of the meeting, the Prime Minister paid tribute to Iraq's health teams for being on the frontline during the current health emergency, and to Iraqi security forces for supporting Iraq's national effort to combat Covid-19.
The Prime Minister thanked Iraqi families for observing the curfew and complying with other restrictions during this very challenging period.
Following discussions, the joint meeting agreed a number of measures, including:
- Extending the nationwide curfew in Iraq until 06/06/2020. Grocery stores, bakeries and pharmacies are exempt, provided that no more than five customers are allowed into such premises at any one time, and that both staff and customers wear face masks
- Restaurants to remain closed, but are allowed to offer home delivery service
- All ministries will remain closed during this period, except for the ministries of Health, Electricity, Agriculture and Water Resources, as well security ministries and municipality services
- The wearing of face masks in public remains compulsory, with fines for those who fail to comply
- Domestic flights remain suspended, as are flights to and from Iraq
- The security forces are directed to strictly enforce these measures in cities and towns, and within neighbourhoods
The joint meeting underscored the importance of all citizens continuing to follow official health advice and physical distancing guidelines, and to comply with the curfew to keep themselves, their families and communities safe.
(Source: Govt of Iraq)
Posted in Healthcare, Iraq Industry & Trade News 1 Comment
Iraq pushes for Rescheduling of Reparations to Kuwait
Posted on 27 May 2020 .
Iraq's Minister of Finance, Ali Allawi, arrived in Kuwait on Saturday for talks with senior officials.
Mr. Allawi held discussions with the Prime Minister of Kuwait, Sheikh Sabah Al-Khalid Al-Sabah, on bilateral relations and delivered a written message from Prime Minister Mustafa Al-Kadhimi.
He also held talks with the Minister of Finance, Barrak Al-Shitan, the Minister of Oil, Khaled Al-Fadhel, the Deputy Foreign minister, Khaled Al-Jarallah and other senior Kuwaiti officials.
The discussions focused on taking forward and implementing the decisions of the International Conference for the Reconstruction of Iraq held in Kuwait in February 2018, linking the electricity grids of the two countries, and rescheduling Iraq's compensation payments to Kuwait.
The two sides also discussed encouraging Kuwaiti investment in Iraq, especially in the commercial and industrial sectors, and in infrastructure.
Mr. Allawi earlier visited Saudi Arabia where he held talks with Saudi officials on deepening economic and commercial and cooperation.
(Source: Govt of Iraq)
Posted in Construction & Engineering In Iraq Comments Off on Iraq pushes for Rescheduling of Reparations to Kuwait
KRG "to Privatise Electricity Sector"
Posted on 21 May 2020 .
By John Lee.
Kurdistan's Council of Ministers has reportedly approved a proposal from the KRG's Ministry of Electricity to privatize the Region's electricity sector.
Ministry official Mohammed Ahmed told Rudaw on Wednesday:
"The government and the people will both benefit from it as it will help reduce a significant amount of stolen electricity."
(Source: Rudaw)
Posted in Investment, Iraq Industry & Trade News Comments Off on KRG "to Privatise Electricity Sector"
$33.6m from World Bank for Coronavirus Outbreak
Posted on 13 May 2020 .
In response to the COVID-19 outbreak in Iraq, the World Bank has recently approved the re-allocation of U$33.6 million under the current Emergency Operation for Development Project (EODP-US$750 million) to support the Ministry of Health's efforts in preventing, detecting, and responding to the COVID-19 pandemic.
This fast track emergency response comes in two phases. The World Bank initially mobilized US$7.8 million from resources that were immediately available under the EODP to help finance the supply of essential medical equipment and supplies and strengthen intensive care unit (ICU) capacity at public hospitals for improved COVID-19 case management.
Through cooperation with the United Nations Office for Project Services (UNOPS), ventilators, ICU beds, ECG machines, mobile X-ray machines and defibrillators will be delivered to designated sites in four to eight weeks.
In a follow-up step, the World Bank also approved the Government of Iraq's request to re-allocate an additional US$25.8 million under the project to supply additional quantities of equipment and consumables and support the training of health workers and front-line responders on their use. The expedited procurement procedures of UNOPS will ensure the timely delivery of medical supplies to the Ministry of Health.
"The pandemic is expected to particularly hit poor and vulnerable households. The World Bank stands ready to support Iraq's efforts to contain the rapid spread of the virus and strengthen the capacity of the Ministry of Health to address the additional strain the pandemic poses on the Iraqi health system," said Saroj Kumar Jha, World Bank Mashreq Regional Director.
The reallocation of funds does not affect the initial scope of the Emergency Operation for Development Project which aims to support Iraq in the reconstruction of damaged infrastructure and the restoration of public services delivery in targeted municipal areas. As a matter of fact, and through the procurement of goods, works and consulting services using World Bank's procurement and financial management regulations, over 3 million people in five governorates liberated from ISIS are already benefiting from improved health services through the rehabilitation of damaged clinics and the supply of 14 mobile clinics and 82 ambulances, restored electricity connectivity by 35%, improved key municipal services with the provision of purified drinking water and waste collection schemes, and restored access through the reconstruction of 400 km of roads and 25 critical bridges. The project is also contributing to promoting state/citizen trust-building and reconciliation through the training of 79 non-governmental organizations and over 1,000 young men and women on peaceful dialogue and reconciliation in their communities.
The Emergency Operation for Development Project was initially approved in July 2015 in the amount of US$350 million. An additional financing to the project in the amount of US$400 million was later on approved in October 2017 to allow the geographic scale-up of existing project activities to additional cities liberated from ISIS.
World Bank Group COVID-19 Response
The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. We are increasing disease surveillance, improving public health interventions, and helping the private sector continue to operate and sustain jobs. Over the next 15 months, we will be deploying up to $160 billion in financial support to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery, including $50 billion of new IDA resources in grants or highly concessional terms.
(Source: World Bank)
Posted in Healthcare Comments Off on $33.6m from World Bank for Coronavirus Outbreak
US Welcomes New Iraq Govt; Extends Iran Sanctions Waiver
Posted on 07 May 2020 .
By John Lee.
US Secretary of State Mike Pompeo (pictured) has welcomed the formation of a new government in Iraq following months of instability.
In a phone call with the new Prime Minister, Mustafa Kadhemi, he said that the US would not enforce sanctions on Iraq buying electricity from Iran for 120 days "as a display of our desire to help provide the right conditions for success".
The full statement via Spokesperson Morgan Ortagus said:
"Secretary of State Michael R. Pompeo spoke today with Iraqi Prime Minister Mustafa al-Kadhimi. Secretary Pompeo welcomed Prime Minister Kadhimi's new government, which was confirmed by the Council of Representatives.
"They discussed the urgent hard work ahead for the Iraqi government, implementing reforms, addressing COVID-19, and fighting corruption. In support of the new government the United States will move forward with a 120-day electricity waiver as a display of our desire to help provide the right conditions for success.
"The Secretary and the Prime Minister also discussed the upcoming U.S.-Iraq strategic dialogue and how they look forward to working together to provide the Iraqi people the prosperity and security they deserve."
(Source: US State Dept)
Posted in Iraq Oil & Gas News, Politics 1 Comment