Can Kurdistan economically hold after separation?

Can Kurdistan economically hold after separation?

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Iraq’s Kurdistan: it is a region of northern Iraq with autonomy, bordered by Iran from the east and Turkey to the north, and Syria from the West and the rest of Iraq from the south, the regional capital is Erbil province.
The establishment of the region dates back to the autonomy treaty, which was signed in March 1970 between the Kurds and the Iraqi government after years of fighting.
The population of the Kurdistan region of about eight million people, including three million of the displaced persons and refugees and expatriate, and around one million and four hundred thousand people work in the government as employees and military personnel.
The region has by virtue of parliamentary democracy with the rule of a regional parliament consists of 111 seats, and the current president is Massoud Barzani, who was elected in 2005 and re – elected in 2009.
It has three governorates of Dahuk, Erbil and Sulaymaniyah, which has an area of 40,000 square kilometers, except the disputed areas, and the region has many and varied economic resources, and can be used in economic activities to meet the requirements of development, but the experiments, proved that the abundance of natural resources alone do not meet the requirements of development and evolution in the countries only if the optimal use of it was done in accordance with the plans and programs in advance.
The region adopts the system of market economy based on the forces of demand and supply , which are represented by the prices and investment in economic , service and productive sectors , without direct intervention by the government, and depends on the freedom of trade and investment in all areas, but this policy has not developed in the region as which it is in other economies, where this economic policy has not kept pace with a clear vision of government to determine through which the role that the private sector should produce, and increase its role in the economic process and reducing government intervention in the economy.

Most political analysts and experts specialists in sources of natural resources agree that the Kurdistan region enjoys, a variety of natural resources and this was the cause of the division of Kurdistan after the First World War between the four countries.

And a future program for the region includes the establishment of the Ministry of Natural Resources in Iraqi Kurdistan, represented by oil and gas fields along the oil belt in Kurdistan and the lines of its export , water, minerals and industrial enterprises of construction and investment of metal ores , and archeological sites, such as the ruins of kunis and its importance, the the investment of rocks of all kinds including investment oily rare presence in the world, and there are different types of igneous and volcanic and metamorphic and sedimentary rocks along the creeping area in the Kurdistan region, which are of great economic importance, if the government Kurdistan was able to invest it as well as the fresh mineral water springs, and the beauty of nature that helps to do active tourist movement .

The region adopts the federal system of governance which will depend on its relations with allies over the extent of the capacity of provincial government institutions and competent bodies for the management of natural resources in proving its active role in the management and organization and the development of institutions responsible for natural resource as one of the most important key files for its independence.
As for oil: oil fields are joined in the area of oil belt with network of pipeline of transporting oil from the fields to Maritime Ports in – the port of Ceyhan in Turkey – located on the Mediterranean Sea and the Iraqi ports overlooking the Gulf, in addition to linking most oil refineries (Qayyarah, Baiji, etc.) to oil fields in Iraqi Kurdistan, which has seen an economic boom before falling global oil prices, which devastated everything, so that the region is losing about ten dollars for each barrel produced.

Diverse natural calls in the region under the shadow of the new situation to set up special directorates and institutions directly linked to the Ministry of Natural Resources in Iraqi Kurdistan to be applied in dozens of diverse scientific studies (through scientific institutions – universities and institutes in Iraqi Kurdistan) that can be by the results of those scientific studies of assessment of real economic feasibility of this very important area from the economic, industrial, tourist aspects and other vital areas.
The chairman of Oil and Energy Committee in the Kirkuk Provincial Council Ahmad al- Askari said the revenues of central government in Baghdad is much higher than the revenues of the Kurdistan Regional Government, noting that oil fields of Kirkuk are divided into two parts: the North Oil Company of the central government and the Kurdistan Regional Government.

And al-Askari pointed out that the central government in Baghdad has to pay dues to the Kurdistan region from the sale of oil, amounting to about one billion and 250 million dollars. the Chairman of the Finance Committee in the region , Azat Saber attributed the low cash in the treasury of the region that the region since 2003 until now gets only 17% of Iraq ‘s budget.

He acknowledged the existence of an exaggeration in the number of employees of the Kurdistan Regional Government, noting that the number of real employees of the government are seven hundred thousand employees out of about one million and four hundred thousand, indicating that it is not reasonable that 70% of the proceeds from the region go to salaries, while agricultural activity semi – absent in the Kurdistan region, and the region depends on the import of 95% of its needs from Iran and Turkey.

The Director General of the Kurdistan region Dillman Saber attributed the causes of the economic crisis in the region to the inefficiency of his government in the oil file, rampant corruption and the monopoly of senior officials of the parties, a number of economic sectors, and the lack of transparency in economic and financial matters.
Observers fear for the region from the influence of political interactions and interests of the two major powers , which govern it and enjoy with the most of privileges and they are namely the Democratic Party led by Massoud Barzani, and the Patriotic Union Party , headed by Jalal Talabani, noting that the number of billionaires from both sides reached twenty people.
Since the region is determined to conduct a referendum on independence from Iraq in the twenty – fifth of this month , despite the opposition from the center, we will put forward the subject within the economic framework, and tackle the experience of other political entities similar to the experience of the region ,

The individual in the Kurdistan region was facing major challenges as a result of the economic blockade imposed on Iraq, in the health sector, the hospital services are low, and are almost non – existent in various Kurdistan regions in 1992, then this vital sector was developed that completion rates of the health development programs have been reached to the rates comparable to statistics of the countries such as Kuwait, and in large numbers compared to Iraq. For example: the proportion of doctors to our population is at a rate of 11 doctor per each (10,000) citizen, compared to Kuwait, which is 18 doctor for each (10,000) citizen. And the great decline in hospitals in 1992, the number of our hospitals reached (74) Hospital, according to the 2014 statistics.

In the education sector, the region has achieved, by 2013, international figures in the number of new schools and the number of registered students as some of the figures in the fields of education have surpassed the numbers of neighboring countries. Bringing the number of schools 5950 schools, and the number of students to more than “1.555 million.”

In the field of tourism, tourist companies in the Kurdistan Region reached to (269) company, total revenues reached 18 billion dinars in 2013.

And it included achievements of service, industrial and commercial sectors ,and transportation, communications , travel and tourism , which are the most important supporting sectors of the plans of sober economic development in any country.

This means that with the development of the political and economic situation, the industry sectors are evolved positively, where we find it in the small industrial Establishment sector, the number of the facility reached 10387, in 2013, while in the area of large industrial Establishment, bringing the number to 89 facility in the same year.

The transport and communication sector scored several successes, as the international flights amounted, in 2014 to international airports in the region, Erbil and Sulaymaniyah, which were built as one of the most fundamental pillars of the strategy of the region, to achieve economic independence, 249.16 trip, the number of domestic flights 6969 trip, accounted for foreign travelers rate of 74.7%, while local 25.3%.

The region achieved the economic independence and the expansion of international trade relations, bringing the number of international operating companies 40 international companies, this at a time when oil reserves and strategic stocks of natural gas to reach to the reserves up to 45 billion barrels of oil, and from 100 to 200 trillion cubic meters of natural gas, and this brief figures show the extent of development and achievement that has been achieved in the Kurdistan region since the nineties of the last century to the present day.
And today, the Kurdistan Region is passing very severe economic crisis and this is recognized by the provincial government, as the World Bank published studies and analyzes and results recently about the Kurdistan Region, talks about the economic crisis in the region and ways to solve them, to mention that the Kurdistan Region has all international basis, and enjoy with many factors that qualify it to succeed in crossing this crisis.
The World Bank said that the most important characteristics of international region are : the presence of large stocks of oil and gas reserves, a fertile agricultural lands, and the majority of its people are young , the geographical location in which mediates the strategic lines of transport s and trade , and a government that is determined to correct errors and implement solutions , and international community ( donor countries ) committed to providing assistance, in addition to the spirit of work of the private sector of the people of the region .

And Observers believe that the separation is not in the interest of the region for the following reasons:
• The Kurdistan region depends, like the rest of the oil -producing countries, as part of Iraq, on the oil revenues, where the oil forms the main element in the Iraqi state revenues needed to cover public spending (17% of this revenue allocated to the region, and that dependence on oil has disadvantages that oil is depleting and non – renewable resource, and here must find alternative sources of income for adoption in the future when this resource run out .
•The economy of the region is weak and serviceable and the production suffers structural imbalances, as a developed and flexible production system (agricultural and industrial) is not available represented by purchasing capabilities that increase the pressures of demand which means the domestic production is unable to meet the domestic demand of imported goods to meet demand, and put strong pressure on the balance of payments, thus increasing dependence on the outside.

• High government spending without appropriate response from the domestic production system, leading to a clear growth of inflationary pressures that have left visible effects on the local production movement, and the need for reconstruction that will lead to higher government spending ratios to GDP, and thus political and economic results do not cast in the interests of the desired changes and reform in the economic system of the region.

• Small size of the local market of the region , which limits the extent of the development of its economic sectors, in addition to the economic policy in the region depends on leaving the local market open to a flood of foreign goods and commodities that it flooded it to the extent that the domestic production can not rise again .
• Poor physical infrastructure, which is one of the basics of fixed capital formation because of the policies of the previous central government, and mismanagement, although the allocation quite a bit of the general budget for the maintenance and expansion of public facilities and the expansion of their energies to suit the growing demand resulting from population growth of 3% in the region.

• High rates of unemployment and underemployment: with an estimated size, according to the Ministry of Planning data in the region 17.86%, and the proportion fell to 14%, and the Statistics director of Sulaymaniyah said it fell to 12% according to UN standards . As for the rate of underemployment in the public institutions of the State reached in 2011, according to a press statement to the former Minister of planning, 45%.

• Financial and administrative corruption is a major challenge facing the government and it is the economic problem facing countries where many state institutions have resorted to withhold data on citizens, for example , citizens are not acquainted in the last two years , on the state budget in both current and investment .
The step of the declaration of independence, or at least a referendum of self – determination, is one of the steps that see a challenge on the security, economic, political and social level that Iraq has not seen before .
The independence needs a political and diplomatic accumulation and ensure recognition of the super States of it , and the opening of a commercial corridor through a special sea port, or with countries that they have no hostility towards the expected state, is it possible to say that the state of Kurdistan will see the light in the middle East , there is no doubt that the internal environment on the mass and popular level in Kurdistan has provided much help in the conduct of the referendum on “independence of the region “, especially with the control of the Peshmerga forces on the borders of the region, while the central government and the neighboring states of the region see the opposite .

Shatha Khalil, a researcher at:
Economic Unity
Rawabet Center for Research and Strategic Studies