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Primacy of the structural reform of the economy based on oil
On: Sun 27/05/2012 7:09
: d. Sabri al-Saadi Zayer
Iraq is currently facing many challenges, including socio-economic: the spread of poverty, slow growth and real development, a high rate of unemployment, low productivity, falling living standards, corruption is rampant and growing every day. Ironically, that since the fall of the previous dictatorial regime, the total net cash total,
From export sales of oil during the period from 22 May 2003 to 31 Dec. 2010 and that received by Iraq through the Iraq Development Fund, amounted to 250.956 billion dollars, while the total sum of cash received by Iraq during the same period amounted to 270.721 billion dollars. Through governance by these facts only financial, it is clear that the economic management of the country in general and the use of oil revenues, in particular, have failed miserably. It is clear that these facts cause for concern requiring economic changes radically and comprehensively, and in particular, Iraq needs a new economic model.
over the last six decades, Iraq was to the economic changes radical and violent political, and since 1952 to play oil revenues, an important role in economic development and social and political of the country. Up to 1980, the use of oil revenues by successive governments is to build the country's infrastructure and increase the economic growth in addition to improving living standards.
It is noted that the economic model for years, the seventies (1970) is characterized by the dominance of the state where the share of the public sector of GDP in large, especially in the industries of crude oil, mining and petrochemical and banking, trade, manufacturing and agriculture.
impact of oil wealth on the political economy, especially during the experience of the past nine painful and very expensive in the post-Saddam, suggests the need to find an alternative to liberalization policies fragmented and non-related and measures imposed by the authority of the U.S. occupation and has been applied by governments in a state of chaos.
Unlike market reforms, which is widely practiced in developing economies, Iraq needs to change to a deep restructuring of the economy. In particular, investment in industrial companies new general - let's call it a model corporate state, and can call it a form of state capitalism - it is necessary to its establishment and operation under the management of non-political organization with authority to freedom of initiative and capacity for innovation and entrepreneurial skills to suit the conditions competition in the market. This model helps to care for liberalization of the economy in the long run, as well as improving domestic consumption of energy which maintains the flow of oil experts in the global market.
Iraq, like other countries accredited in revenue on oil, is control of oil wealth on its economy, the political and the development of socio-economic through heavy reliance on crude oil exports to finance the total demand. Also, economic dynamism is manipulated through the financial policies and cash to the government and the activities of public sector institutions.
In addition to these common features, the countries dependent on oil, also have their differences that distinguish them from each other: the characteristics of a political, social, and demographic (population), and the capacity of industrial productivity, diversity of natural resources, GDP per capita. It is clear that oil revenue was the motivation for economic growth in terms of GDP per capita, but not sufficient for the required expansion in local capacity to produce goods and services and trade. Also, the irrational use of oil revenues have been limited in the motivation of economic liberalization and political dynamics because of the negative oil revenue "excessive" that finance government expenditures "prohibitive." One result of this dynamic was to increase the financial burden on public companies with old-fashioned. In addition, the energy benefits of local crude oil open-ended and growing energy consumption adds more restrictions on the structural economic reform is required.
analysis of the Iraqi experience and perspective helps in marking process of economic growth potential in countries dependent on oil under conditions of economic diversification strategy necessary to reduce the risk of external conditions is suitable for oil exports (revenues). From here, the emphasis on reducing the economy's dependence on oil should be considered as an initial target of Iraq strategy and economic reforms.
complex challenges
, despite the controversy broad prolonged on treatment to deal with the major problems facing the economies dependent on oil, the preparation and modify the initial proposals required to meet local conditions, new and avoid the consequences of the prevailing crisis of the era of economic globalization. For Iraq, it is important politically, as a first step, to reach a consensus of local targets, "a future vision and a national", and then purification of the priorities of economic strategy in the long run, and schedule a program of economic reform structural, and determine the policies of macroeconomic relevant, and boosting the incentives for investment foreign direct settlement for high-technology industries. Also, it is necessary that the economic strategy of the new Iraq to clarify the conditions and speed of economic integration in the global economy in light of the effects of the policy of financial crises in modern world and in the euro area and deceleration caused by the global economic growth.
for all countries, the economic diversity to ensure stability against risks of market instability, and promotes the dissemination of technology, and provides the flexibility of the links between industries and other factors of production. With this, and unlike the experiences of developed countries, the efforts in Iraq, economic diversification should be directed mainly to increase the role of the private sector which has the ability of small and a bit of creativity and entrepreneurial skills. Instead, the state seize the opportunity to own large amounts of oil revenues (foreign currency) in order to increase investment in leading industries. This approach means that the benefit from globalization and integration in the global economy must be tailored to the goals of the state's economic strategy in the long run.
politically, the most precious freedom is the right of man and can not be maintained without the requirements to ensure the basic living of the people. Fortunately, the Iraqis have regained their basic freedoms, but not all, after the suffering and great sacrifices for a long time. This achievement was a necessary condition to maintain the dignity of citizens and pave the way for a long and difficult economic prosperity and social progress, democracy and thriving cultural care. However, it is important Currently, more for Iraq to be seen to the growing concern of the negative internal factors, namely: the continued political instability, ineffective governments, lack of democracy and liberal parties. These factors imposed by the speculation get the excess oil revenues in the near future, it can quickly pay the governing authority with the influence of the United States and the International Monetary Fund - whether consciously or unconsciously - to follow the example of the prevailing political economy model practiced by the Gulf-based oil . In fact, such an approach might partially exercised by the Government of the Kurdistan region of Iraq. Unfortunately, this model is not suitable for economic development in Iraq and does not contribute to political stability in the Middle East.
oil and the political economy of Iraq,
with great power of the oil wealth, the Iraqi central government to make the main options between economic alternatives decisive and not between businessmen or local authorities. From here, and in order to assess the economic outlook for Iraq, what matters is the realization and dynamic behavior of the government action in the allocation of oil revenues. The government's policies affect the facts of macroeconomic, ie, they make the choice between the main alternatives in production, distribution, consumption and investment, especially for the reconstruction of public infrastructure, but these policies unfortunately, was inefficient and inadequate.
Unfortunately, and to over a long period, the country was unable to establish a democratic system able to ensure the efficient use of natural resources and existing human has. In the post-Saddam, not enough to change the very policy-makers. The most important change is the right of the goals and policies of the country as part of the overall change in the political culture and economic thinking. So far, governments still lack the priorities of social and macroeconomic and tend to exert populist politics, resulting in further loss of public resources and the loss of development opportunities. In fact, the task of designing and implementing strategic and economic policy and required, in addition to identifying investment priorities can not be performed by a weak government or rigid intellectually very dependent on oil revenues. Instead, Iraq needs strong political leadership and inspirational vision for the future have a clear and progressive and able to lead the people and businessmen and the business community and civil companies to establish a strict system of economic help of the oil wealth. Unfortunately, the structure and the political process currently is not qualified to allow for the emergence of leadership so that could carry out political and economic choices are correct. Arrangements existing political - that have evolved under conditions of fear and distrust between social groups, political, and lack of confidence in politicians - have generated the dominance of non-efficient for diverse groups: national parties Shiite and Sunni and Kurdish has commitments ideology strong Ktha vague, to varying degrees, as well as to the production of liberal parties and democracy are very weak and fragmented should at least play a positive role in the opposition.
must reform the constitutional law and electoral rules, and legal rights and the executive of the state and the pyramid of government, institutions and facilities policy for a smooth transition of power. In addition, the stagnation of non-oil economic activities, especially public sector companies, need to be institutional and political reforms. As it is necessary to generate a gradual increase of the contribution of taxes on income and profits and other sources of public money, the impetus to improve economic efficiency and promote democratic practices as well as to restore the status of the government.
in politics, is the practice of pragmatism to organize and address the political processes brilliantly, while in the economies developed it is necessary to take into account the severity of policy objectives based on predetermined priorities. Well known that freedom and political stability established conditions are necessary, but insufficient, for the social and economic development. In a democracy, when the country is facing unexpected problems, the government usually requests the views and treatments proposed by the various parties concerned: the political opposition and independent groups and non-affiliated party, experts and professionals. Ironically, in Iraq, where there are a lot of social problems - economic, political, the government and political parties in control were not open to the local opinion and were not you want to consult with independent consultants and qualified sons of the homeland, even though they do not have the strategy and economic policies and a clear agreed.
in light of the political and security requirements, the reforms required to ensure that rational economic choice of policy alternatives must maintain control of the central government on the following:
1. Oil revenues, and fund allocations.
2. Monetary and fiscal policy for the economy overall.
3. Financing of public infrastructure and facilities projects.
4. Investment in high-tech industrial companies owned by the State in whole or in part.
5. Design and implementation of the privatization program.
6. Arrangement and provide incentives for private sector investment and domestic foreign direct investment.
Future vision and priorities of economic
before setting targets economic strategy and priorities of politics, it is necessary to Nacher - as part of a future large-based on past experience and on the idea that the country should be stimulated by "what should be the future of Iraq," but not "what will be the future of Iraq. " This is not a proposal for a political ideal fantasy, and no clear description or speculation to the fact the country's future fits of progress possible for the technology, however it is clear it's an inspiring vision: "In the year 2030 will occupy an independent Iraq's burgeoning democratic prominent place in the world. In 2030 will last three dimensions" of the evolution sustainable ", which meant economic growth and social progress and environmental protection and development of natural resources .... socially, all citizens are equal and will enjoy all the freedoms in the political, social, tolerant multicultural society guided by the moral values of humanity."
Since the political system lacks the ability to provide a wide choice, add to that economic failure, it is very difficult to suppose that the prevailing religious political parties prepared to propose a futuristic vision and commitment to radical economic reforms are needed and deal with existing problems. It is also unable to cope with rapidly changing global economy is not expected, and technological and political realities. With this approach, the following areas should have primacy in importance:
1. Increase public investment projects for the benefit of the economic infrastructure (physical) and state companies. Can perform tasks by an independent public entity, or (Iraqi Council for Reconstruction and Development). Investment required to be funded at least 60% of oil revenues during the years from 2013 to 2015, and by 80% from the year 2016 onwards.
2. Update the financial services sector, especially banks and the stock market and insurance companies.
3. Must establish a system of flexible exchange currency by taking steps to progressive liberalization and the allocation of part of the responsibility to improve productivity and sustain economic growth and stability.
4. Alleviate poverty by generating income for the poor in addition to providing public services and basic needs.
5. Redistribution of income and wealth. In Iraq is a distribution of "fair" income not only the issue of moral, social, or a case involving the lack of a market mechanism in dealing with the pattern is equitable distribution of income, or cause the result of the inefficiency of government fiscal policy in addressing the distribution is not appropriate for a fortune, but it is related to also public ownership of the oil wealth.
must maintain economic growth and therefore should be placed on the same path diversification strategy that must be the private sector plays an important role in terms of value addition to the rate of GDP and exports and public money.
at this stage, the state can provide the financial needs to build new industries, which must be independent and are designed as companies geared to the business fit the circumstances of competition in the market.
when they should be given the incentives for the local private sector in order to promote investment in all activities, especially in SMEs and companies targeted for export, must give special incentives for foreign direct investment for the resettlement of high-technology industries. Should also be arrangements for the application of protective measures conditional and temporary infant industry and some agricultural products, in a balanced manner. In this regard, it is necessary to be reconciled between economic policy and the need for high-tech industries and the provision of employment opportunities through the expansion of production capacities by using labor-intensive technology.
Conclusions
Iraq faces, like the rest of the countries dependent on oil, serious challenges arising from the adoption of the economy entirely on oil exports over a long period. By expanding its economic base to a variety of production activities is competitive, it will be Iraq in a better position not only in order to achieve strong economic growth and accelerate social progress and better standards of living, and but also to develop a political system dynamic with democratic practices and wide.
on Over the past nine years, there has been a radical change in Iraq, not only in macroeconomic policy is efficient and does not own political decline in economic reform, and not in the misuse of money and time consuming efforts in rebuilding the infrastructure of the country. Since the political parties of the ruling lacked the vision and the desire and interest in pursuing a radical change is required, the government adopted a lot to spend oil revenues, the public in order to perform the functions of the state natural and in the face of the needs of citizens and groups, social financial and social - political daily, in addition to service of political interests. However, Iraq has a great opportunity to deal effectively with the serious problems prevailing. Guided by the vision of a national inspiration for the future and the application of economic strategy efficient with the priorities of economic policy are clear, Iraq must begin the program of economic reforms and institutional radical is designed especially for him in order to increase domestic investment, private and foreign direct investment, in addition to public investment by allocating most of the oil revenues to finance infrastructure projects, the physical and social (especially education) and environmental management that must be by an independent entity. At this stage, we must build strong companies owned by the state in high-technology industries, and managed as private companies by the directors of qualified independent technology with the initial creative, and the ability to organize projects and marketing to qualify in order to be competitive in the market.
socially, should government policies that reduce the wide disparities in income and wealth among individuals and regions. The application of the new economic model proposed needs to be a democratic environment and a strong political will and think about the liberal progressive by policy makers, as well as public institutions, efficient and non-governmental actors and civil society organizations are able to stimulate the spirit of the nation to build a strong economy, stable and At the same time maintaining political stability and social progress.
(works Mr. Saadi economic adviser, representing the United Nations previously served as head of technical advisers in a number of Arab countries, in addition to being a specialized macroeconomic and programmer investment. positions in planning and economic policy in Iraq).
J for: Omega site
Translation: long
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