Political Funds. Sustainable Economic and Social Development
20/12/2017 12:00 am
Fares Al Salman *
In the first part we dealt with three types of sovereign funds within the package of funds proposed to establish the Iraqi economy. In the second part, we will address a very important fund in creating sustainable economic and social development.
4. National Development Fund:
The IMF has defined the development funds as funds that finance socio-economic projects, upgrade industries and stimulate industrial production growth, finance infrastructure, enter industrial development partnerships or invest in strategic sectors (such as Singapore's Temasek Fund, Malaysian Treasury Fund, Qatar Investment Authority, Public Investment Fund of Saudi Arabia, Mubadala Fund in Abu Dhabi, and Dubai Investment Corporation (ICD).
In the case of Iraq we see that this fund is the result of the integration of banks (industrial, agricultural, real estate, housing) and the purpose of this step is to tighten departments and capital inflate rather than fragmentation, as well as other sources of funding that I will mention.
This fund will provide a huge boost to the national economy in terms of its contribution to the diversification of sources of gross domestic product through the expansion, financing and development of local activities outside the raw materials sector and development such as tourism, agriculture and industrial activities, as well as the rescue of government, mixed and private companies.
On the application of jobs and appointments in state institutions and the public sector in general, bearing in mind that the three dimensions of sustainable development are in harmony and harmony (economic dimension, environmental dimension, social and cultural dimension).
It is the duty of the Development Fund to seek to control the problems of the internal market and the provision of goods produced nationally, and the opening of internal markets, as well as prevent the fluctuation of prices of raw materials and thus will protect the national products from the fluctuation of prices compared to imported goods and will keep the future exports of goods produced nationally from the decline, And prevent the loss of foreign markets, and the government has the right to withdraw from the fund only to fill the budget deficit so that the withdrawal does not exceed 4 percent of the value of the assets of the Fund.
The fund will also contribute to the separation of state treasury revenues and tax and customs revenues from the economic cycle (as in the case of the Sovereign Fund of Singapore and the Algerian Resource Adjustment Fund). There is a model that can be adopted and developed according to the specific situation of Iraq (National Fund for Investment and Infrastructure in India). The capital of the Fund consists of: Government Capital + Private Sector Capital + Cooperative Model for Long Term Investment.
The board of directors consists of representatives of the government + individual investors and companies + independent individuals (volunteers without financial or commercial interests) and non-profit civil society organizations.
The application in this fund is: The fund invests through major companies called: Platform Companies Or joint investments directly in the assets or contracting with the state for the implementation of infrastructure projects, and also funds projects that were the competence of banks (industrial / agricultural / real estate / housing).
We propose amendments to the Indian model so that the Iraqi Fund (a specialized developmental development fund) aims to change the structure of the Iraqi economy and is funded by the surplus of the general budget + the funds of the DFI Fund + investments from the private sector + all citizens possessing wealth On the development savings and not hoarding money in the home as a result of lack of confidence in the banking system or engage in speculations in the purchase of the dollar), and this fund oversees funds smaller within the structure:
Small and Medium Enterprise Development Fund.
The fund finances production projects (agricultural, plant and animal), industrial production, etc. It also finances marketing projects (collection, sorting, processing, filling, storage, transport, distribution and other activities), as well as financing service projects with a financial return Waste treatment, agricultural mechanization, maintenance, specialized transportation, fuel stations, irrigation services, medical and veterinary clinics, private schools, training institutes and others.
It also funds small investors' projects (provided that there is a fast economic cycle not exceeding 3 years, including the grace period and loans not exceeding 10 million dinars at today's prices) such as craft workshops, small shops, restaurants, etc., but the loan does not exceed 80 percent of the value of the project Short-term loans will be for two years and medium for 3-4 years. The grace period will be according to the feasibility study for each project and on the basis of a grace cycle equivalent to one full production cycle.
B- School Building Fund.
This fund is funded from the resources of each governorate and is due to part of the border crossing fees (if any). Part of the petrodollar revenues (if any) is part of the proceeds of traffic charges and fines, part of the tolls on highways, Official government departments, part of the fees for the transfer of ownership of real estate, selling and buying in the real estate registration services and the book of redress, as well as part of the proceeds of auctions auctions sale of state funds.
C- Hospital construction fund
Financed from similar revenues to the school building fund and to the hospital construction lottery (which was in effect in the early 1970s) + part of the compulsory insurance revenue on vehicles.
Additional Notes Concerning the National General Development Fund:
1 - The housing fund should be developed and made a developmental investment fund. In Saudi Arabia, for example, the Fund's funds have been invested in waste management projects and the financing of high-value recreational projects.
2. We should think about the post-oil era by harnessing the resources of the Development Fund through a forward-looking Orientalism, strengthening the spirit of citizenship and enabling the Iraqi private sector to participate in leading economic development and improving opportunities in the non-oil sectors.
3. Private sector initiatives aimed at diversifying sources of income, focusing on competitive projects, supporting the private sector in investment in information technology and industrial R & D should be supported. The private sector should invest at least 5% of its annual profits in the above fields, , Chemical industries, and manufacturing industries with the aim of creating economic diversification that contributes to the creation of sustainable development.
4 - Reviewing the management and structure of chambers of commerce and the Federation of Iraqi Industries and inviting them to form special departments that encourage and develop and support trade, industry and investment, as well as prepare a study of the industrial map and investment opportunities.
5. The Fund should respect the Santiago Principles, which helped the World Bank establish an international working group in 2008, which established these principles:
- Legal framework and objectives of the Fund and its alignment with macroeconomic policies / institutional framework and governance / investment framework and risk management.
Sovereign funds policies include:
(A) Buy and hold securities for a long period of time, called Buy and Hold.
B) To provide an opportunity for the growth of institutions through the purchase of their shares and thus develop their production lines and move towards the approach of sustainable development.
C) Financing of major projects in Country.
D. Financing high-return projects in developing countries (Singapore used 40 percent of its funds in developing countries).
Of course, in the case of Iraq, the Iraqi External Development Fund will be under this sovereign fund (the National Development Fund) and the Fund will be used later (after the end of the first phase of the General Fund's work, And economic in foreign markets
6. International experiences:
Quebec Development Fund in Canada:
The Canadian province of Quebec has suffered from large indebtedness, as well as a huge investment gap in infrastructure. This fund was created and funded from the province's main salary and pension fund, an integrated model of public-private partnership contracts in the field of design, construction, Property) and called (DBFMT). The private sector selects projects and proposes solutions. These selected projects are removed from the government budget and thus reduce the burden on the government.
(B) Expansion of Highway 33 in the Netherlands:
The Dutch government is trying to expand one of the highways and found that there is no allocation of this paragraph in the state budget, so a company was established between the public and private sector and took this company a loan from the Pension Fund and salaries supports the capital of the company to implement the expansion of the road to be paid the loan and its benefits from The collection of traffic fees on the road, and will announce a tender won by the consortium of companies (consortium) to implement.
* Chairman of the administrative body of the Baghdad Economic Forum