This paper aims to elaborate the US-Iraqi relations though out the course of their relations. It also attempts to analyze the historical relations between the two countries according to the regional events that happened in the past. Besides, it explains why the US-Iraq relations had gone under difficult times in detail.Read More
Currently, economy in the Kurdistan region is facing a number of challenges, which threatens to undermine the future economy, the level of productivity and the sustainable competitiveness of economic performance. This paper studies the factors of economic shrinking: the instability of the region, political concerns with Baghdad and disagreement with the central government.Read More
Kurdistan has enjoyed a long history of both external and internal trade. The region has capitalized on its regional location by implementing policies and laws that attracts investment and economic growth. Trade routes throughout have been running throughout the region for over 6,000 years. Trade is one of the driving sector in the growth of the Kurdistan Region’s economy. Trade is a large source of revenue for the region mainly in the private sector helping to boost small and medium-sized business in the region.
Due to Kurdistan, not being conducting separate region within Iraq precise information is not gathered by international organization, creating a barrier for potential trading and investment in the region. So trade figures in the region vary at around $1.4 billion from estimates of the World Bank.
Imports account for 85% percent of the estimated US$5.0–5.5 billion of annual external trade in the Kurdistan Region. Most imported goods are consumed in the Region and are not re-exported as value-added products. The largest external trading partner for the Region is Turkey. Turkish exports to Iraq amounted to US$2.8 to 3.5 billion in 2007, based on official Turkish Government figures. The Region’s second largest trade partner is Iran. Iraq is Iran’s second-largest, non-oil export market. Iraqis bought some US$1.3 billion worth of goods from Iran during 2006. In 2007 Iran exported nearly US$2.8 billion worth of goods to Iraq in, of which approximately US$1 billion was imported via the Iraqi Kurdistan Region. Iran and Turkey considered the two countries with the largest economic stake in the Kurdistan Region and are also the closest geographically.
There is a lack of regulatory standards for food or basic food safety standards. Regulatory standards are needed for fair competition in the marketplace. This absence of standards has resulted in local government taking its matters into their own hands by banning certain products entering the region this has helped increase the quality of goods in the region. Exports from the Kurdistan Region involve 5% of trade activities. While there are some agricultural exports from the Region, currently much of the export trade in the Region involves the re-export of alcohol and tobacco from Turkey to other countries such as Iran.
Demand for U.S. Products: Iraq was the United States’ 59th largest export market in 2012. Total two-way trade reached $21.3 billion. U.S. goods exports to Iraq in 2012 were $2.1 billion, a $300 million decrease from 2011.
Substantial Market Size: Iraq’s population is currently 31.8 million. U.S. foreign direct investment in Iraq is $1.2 billion. Special Economic zones The KRG currently has four SEZs , in Dohuk, Batifa, Shaqlawa and Chamchamal. The first SEZ was set up in 1999 in Batifa, and the last in 2011 in Shaqlawa. The SEZs are mainly for manufacturing of hydrocarbons, pharmaceuticals , packaged food and processed food. These include the largest bottling plant for Coca Cola in the Middle East outside of Egypt, Israel and the GCC; and the largest production center for ice cream in Iraq and Syria combined. The Chamchammal SEZ is dedicated solely for the petroleum and natural gas sector. Further two more SEZs, in Amedi and Bazian, have been planned to be completed before 2016. SEZs together account for nearly 30 % of all industrial jobs and 40 % of all industrial revenue and output.
The infrastructure of market trade in KR
The KRG attempts to address the economic situation for purpose to correctness the structural imbalance, the motivation of productivity capabilities in KR, with striving toward provision of local economic environment to developing launch with dimension of effective social concern in the private sector to activate its role in economic activity in one hand, and enhance the ability to motivate and attract domestic and foreign investments that generate new jobs. But these programs and policies have not succeeded to achieve high rates of economic growth to ensure the provision of adequate employment opportunities to absorb the large numbers of entrants to the job market every year. Despite the low unemployment rate, but they are in other type of unemployment which disguised unemployment is at high levels, and it is a real problem suffering the economy of the region.
The structural adjustment in KR include arrangement directly or non-directly impact on labor market such as privatization, the consequent on closing the institutions completely, winding up of a company and demobilization of its workforces. As well as caused to some political reform such as the policy of reduction of value from reducing the raw material, secondary and investment material, thereby reducing the volume of investment and disruption of machinery production, which have huge impact on the volume of labor that obligated the government to transferring the workforces in public manufacturing industries to the official administrative department that has led raising the disguised unemployment rate.
It has to distinguish the enterprises in two kinds of enterprises for commercial and enterprises for industry. Who decide before 2003? Big player is government and discussion is inside of public not private sector. The money distribution and ordering of budget consummation was centralized by Ministry of Finance and Economic and they decide all ordering as like as 1930th in Russia. Sometime the MoI has decided amounted for one of them project but ministry of finance they could decrease the amounted as they want and sometime refuse whole the project.
Comparative institutional advantage:
The main KR’s commercial companies were listed on the stock exchange, and global financial fluctuations no longer spare Baghdad and Erbil. In addition, KR seeking Western-Eastern- Iranian-Turkish companies, exactly the Turkish companies.
These factors are fueling new ambitions both internationally and domestically. Iraq has lost behind the crises of the 1990s and in general before 2003, and aims to take its economic and political place among developed countries and be competitive on the global stage. Competitiveness has become a watch word for Kurdish leaders in general and KR’s leaders particularly. The countries opening up is seen both as an opportunity and as a challenge because of the accumulated economic lag and the “curse” that energy resources represent possibly condemning KR to the role of “World supplier of raw materials”.
There are some economists and politicians believe: it must be avoid FDI and KR should not allow the integration of their economies with developed countries economies in several aspects because:
The exaggeration in the application of openness policy has caused to changing in different aspects of economic, politic, and social, even the economic changes were more noticeable and the embodiment compared to other aspects, but the researcher will try to shed light on very shortly on other aspects due to the overlapping side with the social aspects of economic, cultural and political.
The FDI has a risk on KR’s economic in terms of its size and the diversity of its activities, whether industrial or agricultural or services and its installation requires from facilities draining more of its resources and its sovereign considerations especially since many multinational companies took the parts of the economies of the countries to which it belongs and its transformation into affiliates sections in the management of its branches in the world.
It’s important to point out in this area to the rapid profits growth of these companies achieved by the impact of two factors; a) by raising the prices of their products in the markets in which monopolized, and b) by controlling the exports and imports of countries in which it operates and to the extent that leads to imbalance of payments. if it considers the strategies of multinational companies adopted in their investments in developing countries find that they are linked to the interests of political and economic countries to which it belongs. The investment do not include achieving developmental goals its results for service development plans and programs for these countries, just by the extent to which believes it relevant the economies of these countries. with that the researcher incredibly said previously, but also the researcher believes the presence of these multinational companies are necessary to achieve the objectives of the KR’s supreme political because these kind of companies for the purpose of retaining their capital investment are forced to keep the KR’s land of the challenges of other countries politically and sometimes they change their point of view of other countries because of their economic interests in the region and therefore the KR’s authorities must be follow a little bit and premeditated policy of devotion of political - economic.
In sum, the global trend towards economic liberalization is comprehensive approach should to be accompaniment, but by minimal lost, because the next openness will have a lot of negative strongly effects on KR’s small-scale economies, and the low ability to compete with the economies of the developed countries with large scale and huge competitive ability. Due to the KR’s economy is small size, it will be affected negatively for not being able to compete and thus eliminating the emerging industries and exit from the next market.
Market Trade Situation:
The geographic conditions, excess of money supply together with the recent 9 years of comprehensive public investment programs in infrastructure have led to relatively high returns on investment in the region. Despite its positive effects in the creation of trust and security for investors, the mixture of politics and business is a cornerstone to the spread of corruption and the alliance is positively associated with the high level of tolerance of corruption. Over time it is reaches such a level that the state loses public trust and it gradually undermines the stability and the power itself. Increasing incomes, an expanding population and growing urbanization have led to a high consumption rate, which in turn has minimized the risks associated with business in the region, including the storage of large quantities of imported commodities.
The most distinguishing feature of the KR is being a commercial area mission has increased this importance after the second Gulf War, and the imposition of economic sanctions on Iraq, as it became an important outlet for KR's trade with Iraq, Iran, Syria and Turkey indirectly also the KRG benefited its location to the face of the siege imposed by the Iraqi central government moving to establish commercial relations with neighbouring countries to mitigate the impact of dual blockade of KR, foreign trade to become lifeline that created the reasons for success of the Kurdish administration in overcoming many of the problems.
Then, the program of IMF for economic stabilization focused on reducing the demand term in economic in short-term, and if this deflationary policy would address the trade deficit, the deficit budget and reducing the inflation rate. The programs of the World Bank structural adjustment is focusing on expanding the supply side of the medium-term to long-term, through the liberalization of imports and privatization and the removal of protection and support procedures. The stabilization program integrated with economic structural adjustment programs, whose need to get a structural adjustment loan that the country has implemented a program of economic stabilization.
As it clear from the data there are just the data about the imported commodities without the value of export commodities which the reason return to there aren’t the number of exported in accounted except some raw material such as occasion of plastic and aluminum for purpose reprocessing, as well as the exportation of petroleum. It worth to mentioning the administration affair of costume is undertake the responsibility of Ministry of Finance and Economic, and the exportation of petroleum is undertake the responsibility of Ministry of Natural Resources. In the other side the increasing of imported commodities by Compound Annual Growth Rate (CAGR) 44.36% in 2010 comparing to 2007 return to the inabilities of local production for provision the consumer needs in KR. In the other side it notes largest numbers of the goods value that are re-exported from region to Iraqi provinces and vice versa, and some are re-exported to Iran across the land of KR.
It worth to mentioning the KRG did not allowed importing some agriculture production in the production seasons for protection the local production and encouraging the local firms for increasing the local production.
Regarding Iraqi attempting to been membership in the WTO the council minister presidency make a special group for studying how could be a membership in this organ and the chief of Union of Trade and Industry Room in KR “Mr. DaraJalilKhayat” said: “KR is not dependence country and could not be a membership in WTO…. Even Iraq don’t have needed condition for been membership for this matter the discussion of the committee for membership has stopped”.
So, if KR integrates with WTO, there will have negative and positive effect on KR’s economies, and researcher believes that the integration to WTO the KR’s urged would decrease self-reliance in the provision of food and this could be only achieved through the promotion and development of the agricultural sector in this KR, according to a long-term time. But actually it refers to the low contribution of this sector in GDP and that it suffers from major problems and many obstacles.
It noted the number of Turkish companies recorded 38.63% of total foreign companies until 2009 while had arrived to 51.58% of total foreign companies in KR in 31.7.2011 where has increased its number very clearly by 50% of total foreign companies and its reason return to increase the good politic relation between KR and Turkey.
Regarding the registering the companies in KR in the end of 2011 arrived to 13396 companies which 13.3% of them are foreign companies and 86.7% are local companies and Erbil province take the first place of foreign companies by 68.95%.
And if compare the registering of companies by year it could see, before 2010 it was 9166 companies which 11.54% of them was foreign companies and Erbil governorate take lion share of foreign companies by 60.4%.But it could see in 2010 and 2011 registered around half of before this date by registering 4230 companies and it should be mentioned the rate of registering of foreign companies were increased 17.1% for mentioned period which it return to increasing the investment guaranties and securities in region and opening a lot of embassies and consultant of foreign countries, changing the investment environment mentality to openness, as well as increasing the investment activities...etc. as it clear from the data the Erbil governorate increased its registering in foreign companies’ to13.92% in 2010-2011.
Marketing principle of government in KR:
As Adam Smith sees the government to make the organization and discipline it have to organize the economic-social relation between the individuals in society. The private ownership has to take far from risks, and government should prepare assurance for citizen’s private ownership. It's important for advancing the private ownership in society. With developing in this field, the citizen feel in responsibility on ownership, society and him/her nation in general. Democracy and free market pushing to pluralism, because there is authorities' distribution between community and different organs in the society.
In order to facilitate the transformation of the skills needed to adapt quickly to changing dynamics at the economy, the opportunity for studying at vocational and technical schools and institutions for these who want to acquire, develop or change profession has been further expanded. But have to mention there are some interaction administration working in this realm within the coordination of Ministry of Labour and Social Security, Ministry of Plan, ministry of education as well... organizations and institutions in the field of vocational and technical training.
The financial crisis which deteriorated after September 11, 2008, resulted in entering into to global recession period and the countries like Turkey is most evident are the developing countries which were not directly affected from the economic collapse, especially Turkey well find KR that begun early to development and they have a lot of sectors for investing such as airport, road, school and hospital building…etc.
And even if KR, in its own way, tried to reduce the consequences of associated social and political for experiences of proposed structural adjustment by the international monetary institutions or for the experiences more focused on the keeping the greater premium than government intervention in economic regulation, but its success or failure is not associated only the economic regulation method technically, but more related to the existence of government institutions, popular representation and subject to the control and accountability, the things that lacking in the existing political systems the evidence is that ruling elites are primarily responsible for disabling the path of reforms, which are primarily responsible for the consecration of illegal economic practices.
Regarding the economic policy for industrial, as the industry and agriculture sectors are consider the backbone of economic structure, and KR’s economic needs more time for depend on himself resulting to previous regimes system on it, which did not desire to the KR’s development in economic aspect. However, after 2003 the KRG conducted some procedures for developing the industry sector, which regarding problem and obstacles of this sector the minister of industry in KRG “WidadArsalan” in 2009 said: “The policy of the KRG in the field of industry built on the support of the private sector ...etc”. But in other side the economist believed in order to lack of the industrial sector plan in KRG was in underdevelopment! And according the theory of some economist in KR, the achieved development in KR not have impact on KR’s economies in future because almost of investment companies worked on the building field of housing, apartments, and other of real estate that are needed to essential services, so these project did not turn out to unemployed workers to run and create jobs, or to find an industry!.
Actually, the KR needs to long-term plan for development that consistent with the capabilities of material, technological and social. It worth to build or develop the economic sector at the expense of another sector, and KR is an agricultural region as well as provision all of industrial development requirements, and so far, except some manufacturing industries such as Cement and Iron there isn’t have create any an important strategic industry in the KR.
Here, it is raising another question, did have been allocated amounts in the KRG’s investment budget for the development of the manufacturing industries private sector?
Prepared by: Razzaq O. MUSTAFA (Ph.D)
Head of Industrial Zones in Kurdistan Region