Researcher Shatha Khalil *
The Iraqi economy suffers from many problems, ranging from unemployment, administrative and financial corruption, lack of industry, collapse of infrastructure, poor performance of the agricultural and commercial sector, weak law and worsening security problems after the US invasion of Iraq in 2003 and its consequences, as thousands of poor Iraqis found the former Iraqi army camps and government buildings a safe haven for them , they settled in these facilities, although this exceeded the property of the state.
Where the phenomenon of poverty has clearly become a major problem facing the economic development process, after reaching more than 40% of the population. This increase is due to the high unemployment rates, the continued security challenge, the stagnation of economic activity, and there is no clear improvement in per capita income levels and the rise in inflation, especially the rise in prices, has led to a reduction in the real income level despite continuing increases in cash incomes. This has provided ample room for the recruitment of many slum dwellers into criminal acts or their involvement in the outlaw armed militias , in addition to causing high rates of theft, kidnapping and other manifestations that have distorted the image of the social scene in Iraq.
A large proportion of the population of Iraq suffers from poverty, which has become a threat to the cohesion and stability of society, in the absence of clear national economic policies that would reduce the consequences of that poverty, which is chasing families that do not have a decent life opportunity in the oil country and Mesopotamia.
The Ministry of Planning issued a report in 2018 that showed that poverty rates in the cities occupied by the organization “ISIS ” to reach 41%, after not earlier than 20%, and pointed out that the poverty rate in the provinces of southern Iraq amounted to 31.5%, and the central governorates 17%, in Baghdad 13%, while in the Kurdistan region of Iraq to reach 12.5%, after it was only 3% before 2014.
In February 2017, the Higher Committee for Poverty Alleviation in Iraq launched its Poverty Reduction Strategy, and the Ministry of Planning indicated that it had a database based on a social survey of needy families.
The World Bank warned in May of the fragility of the economic situation in Iraq for 2018, pointing out that the national poverty line reached 22.5%, and labor market statistics show further deterioration, and the contribution of young people between 15 and 24 years, a marked decline in support of the economy, as well as the high rate of unemployment rate of twice in the provinces affected by the violence of the organization, “Daash,” especially the provinces of northern Iraq and the West, such as Nineveh, Salah al-Din and Anbar, which experienced large waves of displacement after 2014.
Poverty is not concentrated in a particular place, but its manifestations spread throughout Baghdad and the Iraqi provinces noting that many schoolchildren have been forced to leave school and go to sidewalks and squares in search of a living noting that dozens of young people gather and rush to clean cars parked at traffic lights for 500 dinars (less than half a dollar).
The unemployment crisis has been exacerbated by the continued deterioration of industrial, agricultural and service production, the failure to take the right economic measures, the rehabilitation of the main industries, especially the electricity and drinking water production capacities, and the provision of public services. With the accumulation of these mistakes and failures, more than half of Iraqi youth are unemployed, while the participation of women in the labor force is only 19%, and this unemployment is mostly structural unemployment resulting from the interruption of the main production sectors, especially the sectors of agriculture, manufacturing and most service activities. According to statistics of the Central Statistical Organization, the unemployment rate among young people aged 15-29 years was 22.6%, higher than the national average of 74%, which means that the unemployment rate among males for this category reached 18.1%, while the unemployment rate among females was 56.3% and the rate of participation of youth in the labor force is 36.1%, the percentage of active working males is 61.6% compared to 8.8% for young females. This is in support of the International Monetary Fund’s announcement in May 2018 that the youth unemployment rate in Iraq is more than 40%.
Unemployment is one of the reasons for the high level of poverty in Iraq. The monopoly of government institutions by their directors and their relatives who are belonging to the political parties led to the lack of job opportunities for those who are willing and able to work. According to reports, poverty rates have risen to 10 million, and the displacement of a bout 3.5 million citizen, the mismanagement of the government and lack of professionalism and waste of its members of public funds and stealing allocations of Iraqi people, this means that Iraq’s economic system will continue to falter, even with the rise in oil prices, unless a real strategy is put in place to promote the bad economic reality by the eradication of corruption first.
Investment in Iraq faces major challenges as it ranks late in attracting investments with 168 out of 190 of World Bank indicators for countries that provide an investment-friendly environment.
The Law on the Protection of Employment in the Private Sector is still awaiting review, including that the banking sector fears dealing with young entrepreneurs.
The member of the House of Representatives, “Hassan Fedad” said that unemployment rate increased to 70% in the Babil Province, pointing out that the former federal governments and the current did not move a finger in addressing unemployment and employment of the unemployed.
Babil province is considered a tourist and industrial province with excellence, but there is no government interest to activate these sectors and develop them through investment.
The Prime Minister, “Adel Abdul Mahdi, called on ” to diversify the resources of the national economy by activating the private sector of agriculture, industry and tourism for the employment of the unemployed, and adopt appropriate and effective strategies for the state of the Iraqi economy and key sectors, while providing the appropriate environment, so it is required to adopt proper tasks and goals for Iraqi economic policy , foremost of which is the development of priorities of investment and necessary infrastructure according to realistic data, in addition to determining the position of the market mechanism and the process of financing and accurate real view of the role and functions of private sectors, as well as to diversify the Iraqi economy in order to ease the unilateral oil sector, and increase the contribution of industry, agriculture and tourism sectors and the strategy of the dry channel to activate trade and transit through the territory of Iraq, in addition to the investment of human resources properly through the development of plans and draw a sober economic policy.
In order to achieve these objectives, it is necessary to develop mechanisms and ways to correct the current course through the adoption of a development strategy that ensures access to efficiency in the use of oil revenues, and how to get benefit from them by directing towards financing investment in direct productive capital and investment in social capital to achieve the objective of productive diversification on the one hand, and to create an appropriate investment climate that is conducive to attracting foreign direct investment and enhancing the competitiveness between the public and private sectors on the basis of considerations of productive efficiency and subject to market power on the other hand .
Economists emphasize that one of the most important economic challenges facing Iraq throughout that period are:
– The total dependence on oil, which is uncertain that it will continue to provide the revenues we have inherited in the past years, that the future of oil is unstable and technological and geological developments and economic strategic studies indicate that oil will decline as an energy source, especially if we know that alternative energy in cars and transportation has begun to escalate to be transferred into electric power, and renewable energy sources are starting to appear very much. Oil prices may fall over the next five years to very low levels below $ 30 per barrel, which is a disaster for the Iraqi economy because they do not basically fill up their production costs.
-As the Iraqi economy relies on 95% of the budget for oil, and 50% of the GDP is directly and indirectly affected by the oil sector, the collapse of oil prices will be the major disaster for the Iraqi economy and the impact on individual and national income.
– The economy’s Rentier and its high exposure to the outside world, as a natural consequence of the low contribution of the commodity sectors (excluding oil) to the creation of GDP, which reached very low levels, which explains Iraq’s need for imports to meet rising domestic demand following the increase in operational expenditures in the public budget. An indication of this fact is the high import content of the commodity supply component in the Iraqi market compared to local content. The specific role of the private sector is in the development process in terms of low contribution to economic activity and creation of work opportunity, and to cover the increase in domestic demand and investment financing, making it slow to respond to targeted changes in economic plans unless an appropriate and attractive business environment is created to enable it to be a competitive and interactive sector.
Here, we reach the conclusion that poverty and unemployment can not be eliminated unless the ideas and powers of the country unite to improve all agricultural, industrial and commercial sectors, and not rely on oil, because oil prices fluctuate and can not build economies of a solid state, on price variables as the oil prices are not in the hands of the Iraqi government, but determined by global markets that are not subject to specific factors , sometimes are political and some other times are strategic and others economic, and in the case of economic development ,it must rely on other alternatives that the government can control, and increase these revenues to meet the deficit the public budget .
And those alternatives to the advancement of economic reality are clear and existing, but there must be an appropriate ground so that the government can promote these alternatives that it owns and has not invested so far to be a substitute for oil revenues.
Translated by : mudhaffar al-kusairi
Economic Studies Unit
Rawabet Center for Research and Strategic Studies