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Excerpt from :
2014 Global Agenda for Economic Freedom
The Heritage Foundation Economic Freedom Task Force
Iraq: More Reforms Needed
Iraq needs systematic economic reform in addition to political reforms to stabilize its political system. The country suffers from high rates of unemployment and heavy subsidies for food, oil, and natural gas products, as well as endemic corruption, all of which dim its economic and political prospects.
For decades, Iraq’s governments have imposed a wide array of constraints on economic activity. Though sometimes imposed in the name of equality or some other noble societal purpose, such constraints are in reality most often imposed for the benefit of elites or special interests, and they come with a high cost to society as a whole. By substituting political judgments for those of the marketplace, government diverts entrepreneurial resources and energy from productive activities to “rent seeking”—the quest for economically unearned benefits. The result is lower productivity, economic stagnation, and declining prosperity.
Action Needed: The Iraqi government must undertake systematic economic reforms to root out corruption in the swollen public sector, privatize government monopolies wherever possible, reduce government subsidies to consumers, and create stronger and more effective institutions to improve governance. It is particularly important to create a transparent and effective oil sector, which is the driving force of the Iraqi economy. The central government also needs to create a better business environment for foreign investors and reach an agreement with the Kurdish Regional Government on oil issues to boost exploration and development of Iraq’s huge oil production potential. Negotiations between the Iraqi government and the Kurdistan Regional Government reportedly were close to an agreement on this prickly issue in early 2014 but had not been completed.
U.S. Policy Recommendation: The U.S. should encourage the Iraqi government to undertake free-market economic reforms, root out corruption, reduce government subsidies, and create a transparent oil sector. It should also press the Shia-dominated government to reach out to Sunni and Kurdish Iraqi political parties and bring them into the ruling coalition. This will help reduce ethnic and sectarian tensions, undercut the appeal of al-Qaeda and other terrorist groups, and help to forge a national consensus that will enhance political stability and enable economic growth.
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2014 Global Agenda for Economic Freedom
The Heritage Foundation Economic Freedom Task Force
Iraq: More Reforms Needed
Iraq needs systematic economic reform in addition to political reforms to stabilize its political system. The country suffers from high rates of unemployment and heavy subsidies for food, oil, and natural gas products, as well as endemic corruption, all of which dim its economic and political prospects.
For decades, Iraq’s governments have imposed a wide array of constraints on economic activity. Though sometimes imposed in the name of equality or some other noble societal purpose, such constraints are in reality most often imposed for the benefit of elites or special interests, and they come with a high cost to society as a whole. By substituting political judgments for those of the marketplace, government diverts entrepreneurial resources and energy from productive activities to “rent seeking”—the quest for economically unearned benefits. The result is lower productivity, economic stagnation, and declining prosperity.
Action Needed: The Iraqi government must undertake systematic economic reforms to root out corruption in the swollen public sector, privatize government monopolies wherever possible, reduce government subsidies to consumers, and create stronger and more effective institutions to improve governance. It is particularly important to create a transparent and effective oil sector, which is the driving force of the Iraqi economy. The central government also needs to create a better business environment for foreign investors and reach an agreement with the Kurdish Regional Government on oil issues to boost exploration and development of Iraq’s huge oil production potential. Negotiations between the Iraqi government and the Kurdistan Regional Government reportedly were close to an agreement on this prickly issue in early 2014 but had not been completed.
U.S. Policy Recommendation: The U.S. should encourage the Iraqi government to undertake free-market economic reforms, root out corruption, reduce government subsidies, and create a transparent oil sector. It should also press the Shia-dominated government to reach out to Sunni and Kurdish Iraqi political parties and bring them into the ruling coalition. This will help reduce ethnic and sectarian tensions, undercut the appeal of al-Qaeda and other terrorist groups, and help to forge a national consensus that will enhance political stability and enable economic growth.
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