BY: Shatha kalel
Iraq possesses significant industrial potential rarely found within a single country: extensive oil, gas, and mineral resources; a large domestic market; a strategic geographical position connecting the Gulf with Türkiye, Iran, and the Levant; and a workforce that could be developed into a foundation for manufacturing and export-oriented industries capable of diversifying the economy and reducing dependence on oil revenues and imports.
Yet Iraq’s industrial sector continues to perform far below its potential. Dozens of factories remain idle or operate below capacity, imported products compete strongly with domestic production, investors face lengthy procedures involving multiple government entities, and many state-owned companies rely on partnership and rehabilitation contracts with the private sector to restart their factories.
The problem, therefore, cannot simply be reduced to the word “corruption.” An examination of Iraq’s Ministry of Industry and Minerals reveals a combination of **administrative inefficiency, weak governance, bureaucracy, workforce overstaffing, struggling state-owned enterprises, limited transparency, and extensive reliance on partnership contracts**, alongside corruption cases that have been judicially established and other allegations that still require investigation.
The real question is not simply whether corruption exists. Rather, it is:
**Why have Iraq’s resources, factories, institutions, and workforce not been transformed into production, exports, employment, and sustainable economic growth?**
## 1. The Crisis of State-Owned Companies and Factories
The Ministry of Industry and Minerals oversees a large network of state-owned companies and factories. Publicly reported figures in 2026 indicate that the Ministry oversees **31 state-owned companies and 312 factories, of which 225 are operational and 87 are idle**.
The existence of 87 idle factories raises fundamental economic and administrative questions.
Why has each factory stopped operating? Is the problem outdated technology, poor management, inadequate financing, energy shortages, foreign competition, or lack of raw materials? Why are some industrial facilities allowed to remain inactive for years without a clear decision to rehabilitate, restructure, close, or transfer them into an effective partnership with the private sector?
In a modern economy, a government-owned industrial asset should not remain for years as little more than land, buildings, machinery, and employees.
It should either generate production and economic value or be restructured according to a clear economic plan.
## 2. Disguised Unemployment and Administrative Overstaffing
One of the most important questions surrounding Iraq’s state-owned industrial companies concerns whether the number of employees is proportional to actual production.
The presence of employees, technicians, engineers, researchers, accountants, legal specialists, and managers within the Ministry is both normal and necessary. Industrial development requires engineering, research and development, quality control, marketing, investment management, planning, maintenance, financial management, and legal expertise.
The problem arises when an idle or underperforming factory continues to employ a large workforce without generating corresponding production or revenue.
This creates what economists describe as **disguised unemployment**: employees remain officially employed and may attend work, but the institution is unable to make productive use of their skills and capacity.
Disguised unemployment is not necessarily criminal corruption. It may result from decades of conflict, outdated economic structures, government hiring policies, factory closures, or failure to modernize production.
However, it becomes a form of persistent administrative and financial waste when it continues for years without retraining employees, reallocating workers, modernizing factories, or measuring productivity.
The solution should not be mass dismissal of employees.
Instead, Iraq needs a comprehensive workforce transformation program that retrains employees and redirects their skills toward modern industrial sectors.
## 3. Growing Dependence on Partnership Contracts
The Ministry has reported **144 partnership contracts with the private sector currently under implementation**, with approximately **90 additional contracts under evaluation**, bringing the total to around **234 partnership contracts**.
Partnership contracts are not inherently problematic.
When properly designed, they can provide an effective mechanism for industrial development. Private companies may possess capital, technology, management expertise, and access to markets that struggling state-owned enterprises lack.
The danger emerges when partnership contracts shift from being a tool for industrial development into a permanent substitute for reforming state-owned companies or establishing a coherent national industrial strategy.
The success of the Ministry should therefore not be measured by the number of contracts it signs.
It should be measured by what those contracts actually produce:
**real investment, increased production, technology transfer, employment creation, higher government revenues, stronger domestic manufacturing, and increased exports.**
The existence of approximately 234 partnership contracts requires a transparent monitoring system through which citizens, Parliament, regulators, and oversight bodies can examine the performance of each individual contract.
## 4. Limited Transparency in Evaluating Partnership Contracts
The most important oversight problem is not the existence of partnership contracts themselves, but the availability of information about them.
For every major partnership contract, the public should be able to access essential information, including:
the identity of the investor and the company’s beneficial owners; the promised and actual investment value; the valuation of state-owned assets included in the agreement; the government’s share of profits; the investor’s share; the duration of the contract; targeted production capacity; the number of jobs created; the percentage of local content; export performance; environmental obligations; and measurable performance indicators.
The reasons for extending, amending, or terminating contracts should also be publicly disclosed.
Without this information, it becomes extremely difficult to determine whether a contract represents a fair partnership for the Iraqi state or an excessively favourable arrangement for a particular investor.
The absence of transparency also increases the risks of conflicts of interest, political influence, favouritism, and corruption.
## 5. Corruption Cases and Allegations Must Be Clearly Distinguished
Over the years, the Ministry of Industry and some of its companies have faced cases involving contractual or administrative violations, some of which resulted in judicial rulings.
This demonstrates that corruption risks in public contracting are not merely theoretical.
At the same time, parliamentary and media allegations have emerged concerning certain partnership contracts, profit-sharing arrangements, and contracting procedures.
However, it is essential to distinguish legally between three different categories:
**corruption established through a judicial ruling; suspected corruption that remains under investigation; and poor or economically unsound administrative decisions that do not necessarily constitute criminal conduct.**
Confusing these categories weakens serious anti-corruption efforts.
The appropriate approach is to obtain the contracts themselves, feasibility studies, committee records, asset valuations, and related documentation and subject them to independent financial, technical, and legal review.
## 6. Bureaucracy and Complex Investment Procedures
One of the major barriers facing industrial investment in Iraq is the length and complexity of government procedures.
An industrial project may require approvals or interactions with the Ministry of Industry, the National Investment Commission, the Ministry of Finance, municipalities, electricity authorities, environmental authorities, customs, tax authorities, banks, land-owning government agencies, and security institutions.
Every additional signature means additional time and another potential point at which an investment can be delayed.
The Ministry itself has acknowledged the need to simplify contracting procedures and reduce bureaucracy.
But bureaucracy cannot be solved simply by establishing additional committees on top of existing committees.
The real solution is to **reduce the number of approvals, establish legally binding processing deadlines, and transfer investment procedures to a fully traceable digital platform.**
## 7. Too Many Committees and Too Little Individual Accountability
One weakness common in public administration is the tendency for decisions to pass through numerous committees and administrative levels.
Although this structure is intended to protect public funds and ensure oversight, it can create another problem: **the disappearance of individual accountability**.
When a project succeeds, multiple institutions may claim credit.
When it fails, identifying the person or institution responsible for the delay becomes difficult.
Modern administration requires a clearly designated official for each major project, measurable performance indicators, a defined timetable, and results that can be independently evaluated.
Employees and managers should not be evaluated solely on attendance or compliance with procedures.
They should also be evaluated on **what they actually achieve**.
## 8. Weak Links Between Industry and Scientific Research
Advanced industrial economies are not built by factories alone.
Universities and research centres form an essential part of the industrial ecosystem.
Countries such as Germany, Canada, and South Korea connect universities with companies, support applied research, and provide incentives for innovation, automation, artificial intelligence, advanced manufacturing, and clean energy.
An industrial sector that continues to rely on outdated production lines without continuous technological modernization will eventually lose competitiveness regardless of the level of tariff protection it receives.
Iraq therefore needs stronger institutional links between the Ministry of Industry, Iraqi universities, research centres, and private companies through joint industrial research and development programs.
## 9. Weak Export Orientation
One of the major differences between Iraq’s industrial model and successful industrial economies is the way success is measured.
In many advanced and emerging economies, producing for the domestic market alone is not sufficient.
Industrial companies are also evaluated according to their ability to compete internationally and export.
South Korea, for example, built much of its industrial transformation around a simple principle: the government can support companies, but those companies must demonstrate their ability to produce efficiently, develop technology, and compete in export markets.
Iraq therefore needs to move beyond the slogan:
**“Support the national product.”**
It should instead pursue:
**“Build an Iraqi product capable of competing globally.”**
## 10. Defining “Made in Iraq”
Protecting domestic production is important, but such protection should not be extended to products that contain little genuine Iraqi value added.
Iraq therefore needs a clear definition of local content.
Simply importing components and assembling or packaging them in Iraq should not automatically qualify a product for all the privileges associated with domestic manufacturing.
Iraq could establish a progressive local-content system.
A minimum percentage could initially be required, followed by gradually higher requirements over time, accompanied by obligations to manufacture more components domestically and transfer technology and technical knowledge to Iraqi workers.
Under such a system, partnership contracts would become mechanisms for building Iraqi industrial capacity rather than merely facilitating the entry of imported products under a different label.
## 11. Electricity, Energy, and Infrastructure
A competitive industrial economy cannot be built on unreliable electricity and high energy costs.
Investors calculate the cost of every unit produced, not merely the cost of land or the value of a tax exemption.
New industrial cities should therefore be provided in advance with reliable electricity, gas, water, roads, telecommunications, and logistics infrastructure.
Iraq could also make much greater industrial use of its natural gas resources, including gas that has historically been flared, by directing it toward electricity generation, fertilizers, petrochemicals, and energy-intensive industries.
## 12. Industry and Imports
Iraqi manufacturers face significant competition from imported products.
The solution, however, is not indiscriminate closure of the market.
Industrial protection should be **temporary and conditional on performance**.
An emerging industry could, for example, receive protection for a defined period provided that it increases productivity each year, raises local content, reduces costs, improves quality, and ultimately develops export capacity.
If companies remain permanently dependent on government protection without improving their competitiveness, Iraqi consumers ultimately bear the cost.
# How Do Ministries of Industry Operate in Advanced Economies?
The primary function of a modern ministry of industry is generally not to directly manage thousands of workers and state-owned factories.
Its central role is to **create an environment in which companies can grow, innovate, invest, compete, and export.**
Industrial institutions in advanced economies therefore focus on attracting foreign investment, financing innovation and research, supporting small and medium-sized enterprises, developing strategic industries, building a skilled workforce, connecting universities with industry, promoting competition, and helping domestic companies enter international markets.
Their performance is assessed through measurable indicators such as:
investment attracted, industrial exports, productivity growth, new companies established, high-skilled employment, research and development expenditure, and the contribution of advanced industries to the national economy.
This is the type of institutional transformation Iraq needs.
# A Proposed Reform Roadmap for Iraq’s Ministry of Industry
Reform does not necessarily require creating another government institution. It requires changing how the existing Ministry operates.
**First**, conduct a comprehensive audit of all state-owned companies and factories and classify them into four categories: successful factories capable of expansion; factories that can be rehabilitated; factories requiring strategic private-sector partners; and factories for which continued operation in their current form is no longer economically justified.
**Second**, establish a unified **Partnership Contract Transparency Platform** publishing the financial and operational performance of every partnership agreement.
**Third**, require independent review before any major partnership agreement is signed, including professional valuation of state assets, verification of feasibility studies, and assessment of whether the proposed financial arrangement provides fair value to the Iraqi state.
**Fourth**, establish a publicly accessible **beneficial ownership registry** for companies entering government contracts. This would help identify shell companies and reduce the risk of hidden relationships with politically influential individuals.
**Fifth**, establish a **single digital window for industrial investment**. Investors should submit one application, while government agencies coordinate the necessary approvals internally.
**Sixth**, impose legally defined deadlines for government approvals. If an agency fails to respond within the prescribed period, the application should automatically escalate to a higher administrative level.
**Seventh**, review the industrial workforce and introduce large-scale retraining programs covering automation, renewable energy, advanced maintenance, industrial artificial intelligence, and modern quality-control systems.
**Eighth**, link executive compensation and performance incentives in state-owned companies to measurable results rather than the number of official letters, meetings, and committees.
**Ninth**, establish a **National Industrial Development Council** bringing together the ministries responsible for industry, trade, finance, energy, planning, higher education, investment, and representatives of the private sector.
**Tenth**, identify a limited number of sectors in which Iraq possesses genuine competitive advantages—including petrochemicals, fertilizers, food processing, pharmaceuticals, construction materials, metals, and energy-related industries—and concentrate national resources on developing them.
**Eleventh**, establish a clear national policy to increase Iraqi value added and local content.
**Twelfth**, gradually transform industrial policy from production primarily for the Iraqi domestic market toward an **export-oriented industrial strategy** targeting Gulf, regional, and global markets.
**Thirteenth**, establish specialized and expedited commercial dispute mechanisms so that major investments are not left unresolved for years.
**Fourteenth**, publish an annual **State of Iraqi Industry Report** detailing each state-owned company’s production, revenues, profits or losses, exports, workforce, contracts, and investments.
# From a Ministry That Manages Factories to a Ministry That Builds an Industrial Economy
The fundamental reform required is a change in the questions the Ministry asks about its own performance.
Instead of asking:
**How many companies and factories do we own?**
The question should become:
**How much economic value has Iraqi industry created?**
Instead of:
**How many partnership contracts have we signed?**
Ask:
**How many investments have actually become productive factories?**
Instead of:
**How many employees do we have?**
Ask:
**What is the productivity of our workforce and industrial facilities?**
And instead of:
**How many products have we protected from imports?**
Ask:
**How many Iraqi products have become competitive enough to export?**
# Conclusion
Iraq does not suffer from a shortage of resources or industrial opportunities.
Its greater challenge is **transforming those resources into productive institutions**.
The Ministry of Industry and Minerals could become one of the most important engines of economic diversification if it evolves from administering a large network of struggling companies, contracts, and bureaucratic procedures into an institution that leads a national industrial strategy based on **productivity, transparency, technology, competition, investment, and exports**.
Corruption must be confronted through law, investigation, independent auditing, and accountability. But fighting corruption alone will not be sufficient.
Iraq must also reform bureaucracy, modernize public administration, clarify responsibility, measure performance, restructure state-owned enterprises, and develop its workforce.
Ultimately, one simple question should be asked about every company, every major contract, and every senior decision within the Ministry of Industry:
**What did this decision add to the Iraqi economy?**
How many factories did it bring back into production?
How many genuine jobs did it create?
How much investment did it attract?
How much technology did it transfer?
How many imports did it replace with genuine Iraqi production?
And how many dollars did it add to Iraq’s exports?
When the answers to these questions become public, measurable, independently verifiable, and subject to accountability, genuine industrial reform will have begun.
Continuing to measure success merely by the number of contracts, committees, employees, and official documents will not build an industrial sector capable of building a nation.
Economic Unit – North America Office
Al-Rawabit Center for Research and Strategic Studies