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Transcript of Iraq Britain Business Council (IBBC) teleconference November 25, 2020 POST 1

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Transcript of  Iraq Britain Business Council (IBBC) teleconference November 25, 2020 POST 1

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(this is the computer generated transcript.

These persons are teleconferencing, speaking directly into computer screens without prepared speeches.

This transcript is complete without removing text on my part.

For clarity of thought I formatted into statements, rather than leaving the transcript as one monolithic paragraph as the computer displayed.

I apologize to IBBC and esteemed participants for any mis-formatting that might misrepresent what they were conveying)


okay everybody i think people are signing up here just to welcome everybody to the ibbc webinar um on the discussion about uh the government iraq's white paper for reform

and uh as an addendum to that observations on a biden presidency in iraq so we're just starting any second now

okay so welcome everybody um i'd like to uh uh welcome you all and

i'm Ashley goodall i'm the chair for today and uh just to take you through who our panel are

we have schwann aziz who's a member of the ibbc advisory council a member of ammar foundation and former chief of staff the iraqi deputy prime minister in 2010 to 2020 and various other jobs with undp as well

we have dr frank gunter he's a professor of economics at lehigh university in the us uh he's a senior fellow foreign policy research institute advisory council member of the iraq
britain business council and various other dignified positions as well

uh we have hadil hassan who is the owner of hadil al-hassan which is a leading iraqi law firm in baghdad and she's also an executive member of ibbc uh

we finally have hari al damiriji who is ibc board member executive board member of the mit sloan school of management founder optitune and former deputy chairman of the
trinity group and

last but not least lizzie porter he's a multi-award-winning british journalist senior correspondent for Iraq oil report she's based in her bill and Baghdad

so thank you all very much for coming today uh

i'd like to start off with uh inviting schwann to talk uh as you all know the government of Iraq has public paper and

this is uh for reference the first white paper that the government a government of iraq has ever issued so there's enormous positives about this and set out an intent to improve and reform the country's economics and situation

so we're going to start with schwann who'll be talking more about what's in the paper and subjects around that

thank you

well thank you ashley and welcome to all who have joined us and have
i hope all of you have a good day uh to start with

the white paper is an ambitious economic reform plan published by the government of Iraq that this reform plan aims to
- establish and maintain macroeconomic stability
- foster private sector growth and
- diversify the economy uh in general it's uh
- it offers uh the general direction for Iraq to overcome the range of financial and economic problems the country is facing and

these problems have resulted from multiple shocks multiple and successive shocks that the country witnessed during the last few decades

now the white paper is built around five main areas or i call them thematic areas

theme one is it aims to achieving sustainable financial stability to slow down or stop the
financial bleeding and buy time to realize structural reforms


under this area or the sea theme uh the government intends to enable the
state to increase its revenue rationalize expenditures and better mind manage its finances

the second theme area or the second main area will be implementing micro economic reforms with priority to productive economic sectors that offer sustainable employment and provide real economic alternatives to enhance productivity of non-oil sectors that can contribute to gdp

under this main category reforms will include modernizing the banking sector which is an important problem can be an effective channel to

provide financial support to the private sector uh and

activating two main sectors agriculture and oil and gas

that are main drivers of the economy and of course

support private sector growth

restructuring state-owned enterprises which has is an issue that has been on the table
since 2003 or four and of course

enhancing the skills and capacities technical capacities of the labor force and this
this could be achieved through a systemized education and training programs

the third area will be uh improving basic infrastructures uh that can create suitable grounds to expand and diversify the economy and support other sectors uh in order to achieve competitiveness and diversity uh

here the goi intends to target and develop electricity sector telecommunication transport free zones and industrial cities

the fourth area or the fourth theme will be providing basic key services to meet the immediate needs of the population and rationalize and direct social care and priority given of course to the vulnerable ensuring that they are protected during and after reform processes

here the targets will be key services key services in terms of
water sector board drinking for agriculture purposes

sanitation and

social protection systems and

retirement schemes and of course

another important area which is education which is a human right not only a service that the government can provide but mainly around the schooling and construction of schools

the fifth and last area is mainly to develop governance legal and administrative environments to enable the institutions and individuals working in these institutions to implement the reforms

here the focus will be to improve in general the performance and implementing capacities of the public sector procurement and contracting processes and

enhancing uh in general the business process and improving

improving a business process to be able to attract private sector businesses and and and investors uh

one more thing before I end is to mention a development that happened after publishing the white paper which was

the establishment of the iraqi economic contact group iecg

this happened during the prime minister's visit with his key ministers to europe to germany france and this group was announced in london

it mainly consists of the g4 countries

imf
the world bank
the european bank of for reconstruction and development that iraq recently has joined or became a member of and

from the iraqi side
the ministry of finance
the central bank of Iraq and the
council of representatives through its financial committee

the iecg will work with the government of iraq
to develop the roadmap to sequence and
prioritize the reforms of the white paper align and
mobilize international support for to support the government in delivering the reforms
mentioned in the white paper

thank you ashley back to you

thank you very much i think if we can go on to uh

dr frank gunter now i mean obviously there's huge areas here we need to discuss about economic reforms practical application white paper political opportunities etc

but i think frank if you could go into your immediate outtakes that'd be great and then maybe uh as as each person exposes their particular angle on it we can then start to
after that talk about solutions and and how these might be implemented so

dr frank over to you please

excellent and i greatly appreciate the invitation

i i think the group in iraq that has the most to gain from the success of the policies recommended in the white paper or the most to lose if these policies are not executed are the young people of Iraq uh every year about 900 000 iraqis become old enough to work

if you subtract out the jobs that are open because of retirement and deaths and the very low labor force participation rate among women iraq still needs about 370 000 new jobs every year the white paper puts us on page 26 370 000 new jobs every year just to keep the unemployment rate from increasing well uh since 2005 it's been difficult for the government to create enough jobs and

since 2014 it's been impossible with the drop in oil prices so the current situation among the young people is serious uh

there is no good data but my estimate is that they're about eighty percent eight zero eighty percent of the young men in iraq are either unemployed or underemployed

either don't have a job or if they have a job the job doesn't use their education doesn't use their skill set

the impact of this is is beyond the economics uh the arab youth survey of 2020 just came out and among iraqi young they're losing trust in the government

90 percent support the protest uh 76 percent believe the government is very corrupt
Um there is an interesting decline in religious beliefs

uh the number of young iraqis that uh say that their religion is important to
them has continued to drop and is now around 40

individual iraqis seem to be taking on a lot of personal debt which they're having trouble financing and

among the countries in the middle east northern Africa uh iraq is one of the few countries where a majority of the young people want to immigrate

according to the survey about two-thirds 66 percent of all the young people Iraq want to leave the country the two countries they want to go to is either the emirates or the united states are the top two countries on the list

so the challenge that the iraqi government faces is that they can no longer act as the employer first resort they can no longer create the government of government jobs to keep even the college graduates much less the the other young people who are employed and some

some of the discussion has said this is a temporary problem it's a 2020 problem a 2021 problem

i don't think that's accurate

i think with low oil prices expected the last i see earlier today

exxon mobil lowered their predictions of oil prices for the next decade um

if i had to put money on it i'd say we're locking in a decade of 50 barrel oil or less for the decade

so they can no longer afford to be the employer of these young people so to me uh

schwann laid out the the different themes or axes to me the most important one is the
second one the creation of sustainable employment uh particularly section three which
talks about private sector
in the english version this would be pages 55-59

this is if executed this will create a vibrant private sector and increase the employment opportunities without the government of iraq having increased spending prior to this white paper

prior to this white paper i think the most accurate description of the government of iraq's attitude towards the private sector was hostility uh the world according to the world bank's ease of doing business survey iraq is 171st out of 190.

it is one of the most hostile environments for private business in the world

getting credit one of the categories it's the worst in the middle east in northern africa

resolving insolvency it is tied for worst in the world so the

the white paper provides 20 specific changes to simplify the process of starting a business to reduce the regulatory hostility to provide opportunities for finance to make it easier to successfully run a private business

one of the criticisms that has been made that i think is invalid is that sure you can reduce the hostility towards private business

but that's going to mean we're going to have to wait a decade or two before the private sector jobs will be created in sufficient numbers to reduce the unemployed young men and young women or reduce the quantity of unemployed young men and young women

i think this is inaccurate about 20 my estimate about 20 of iraq's labor force is currently employed in the underground in the informal economy

uh they're in the informal economy to hide from the government and being in the informal economy being in the underground economy is incredibly inefficient it is it is very inefficient

if the detailed white paper plan is followed in this third theme of rationalizing business regulations then we're not going to have to wait decades for gradually small firms to be formed

i think what you're going to see is a large number of these underground informal firms move into the formal economy increased efficiency and hopefully increased employment

uh actually i've talked enough but if I could just just end with one point i think that if you're looking for a good understanding of description and analysis and policy recommendations of for uh iraq right now i i think they're really three sources

you could go to first of all this paper this uh the government of iraq's october it came out in October white paper excellent the good place to begin

the second would be the world bank and it came out earlier this month in november with their iraq economic monitor

and it's interesting that where the world bank discusses the white paper the the goi white paper their now their analysis is generally favorable and

third and finally i'd recommend the ibbc report of may uh it's not very long but it provides a very good discussion of the issues and the challenges and the possible policies
thank you

thank you very much frank that's really interesting and we had a a tech call last week with a lot with the world bank amongst others

and one of the impediments was that uh people to register business costs 36 and a half thousand dollars

so let's hope that that impediment goes away and your informal economy uh starts to creep into the mainstream

thank you very much

if i could go now to uh honey al dimaggio now

addy i believe you're going to look at the economy uh and give us some insights on that

thank you yes absolutely

um what i'd like to say first of all is if you take the revenues from 2003 to the 30th of
september 2019 you you received 597 billion dollars not from oil revenue 99 billion of that was basically from non-oil revenue expenses were around 864 billion and they had a surplus of 133 billion of which 68 billion was in foreign reserves

according to the ministry of planning statistics they say there's about 20 below the poverty line and i totally agree with frank we have issues with poverty and we have issues with unemployment um i

i would say that's that that's really basically quite uh quite conservative

it's more likely to be reaching 40 percent you have a lost generation of youngsters and effectively you ended up with a failed state as a result of these policies you have around between 300 3.2 million to over 4 million people are employed by the state according to the fragility report of um the world bank 57.3 percent has earned less than 5.50 a day

being iraq being the second largest producer of oil in the middle east it's totally unacceptable and as frank said you have a hostile business environment

there's no such thing as e-government there's no online services

you have  mundane bureaucratic systems which work against business practices

you have a cons consociational democracy steeped in rivalry bitterness and disagreement

nepotism and patronage is prevalent

there's no seriously independent judicial system

there's no independent audit and accountability body that exists the current account deficits

according to the uh world bank in april said uh that that this was a problem 18 of gdp actually stopped 97 of gdp

you have budget deficits of around 25 percent of gdp

wages and pensions around 25 percent of gdp and
debt to gdp ratios of 80

declining foreign reserves from what was 68 billion is going to reach 40 billion by the end of the year

as as schwann and frank mentioned
you have problems electricity uh
portable water coverage 19

amongst other things that need to be addressed urgently and

they are being addressed in the white paper

all of these issues that i'm raising are being has you know are are issues that the white paper will deal with

so historically mismanagement of oil revenues the welfare economic level is shocking

no checks and balances in the system

revenues were previously around over slightly over 10 percent but because of the covert 19 it's now below 10 and

government only has access to 10 percent of revenue from borders it's impossible for it to take control of those borders without entering into some form of internacional warfare

um if if if you look at the short-term solutions the government must be allowed to take out external loans

they're not allowing them to take external loans it's being forced through no fault of its own to borrow internally from foreign reserves and that's a disaster because as the reserves drop people lose faith in the dnr they should be allowed to

now if you look at china
its debt to gtp ratio is about 280 percent but but in 2009 it had six trillion dollars of debt now it has 43 billion trillion uk will reach 106 by the end of the year

usa is just a couple of percentage points under 100 percent

i don't understand the rationale i'm not allowing government to borrow externally

but where i'm not quite in uh i mean i

i do understand when frank is right that that the price of oil is going to be stuck at a certain level but we have to understand that the global economy is in an induced coma

once covered 19 is sorted out and the economy is back on track there's going to be pent-up demands in areas that will have a positive impact on oil prices at least for the next few years and and

i'm not saying it's going to be great but it's going to be enough to be able to in my opinion to cover these imbalances and

if there is more flexibility on debt it will give them breathing space to focus on the long-term plans corruption is rampant and government expenditures ridiculously high

without economic reforms as for the white paper if corruption continues we will be heading into height into the hyperinflation stratosphere and

this has to be avoided at all costs

the point is that if we do not solve the the the short-term borrowing we are actually in a vicious circle we have to have these short-term borrowings to be able to implement the strategy of the white paper and and and and

that's where i am in in in this part okay thank you

thank you thank you hari it's quite a difficult scenario we're facing here obviously time is important implementation is important uh and corruption is important uh and on that note

i'd like to come to hadil hassan if that's right has padilla uh you won't accept extensively
and and you have pretty clear views about what some of the problems can be
but also what might be some solutions

uh thank you ashley thanks everyone

let's start uh actually uh by saying that uh we we need to talk about this white paper

know exactly what it is we all acknowledge the the importance of the white paper at this point at this point in time it's uh

it's addressing a critical situation in Iraq uh in the current time and

addressing providing an early treatment for future economic problems that we are going to face uh sooner or later

it's also important because this is a unique paper actually iraq for the first time comes up with such a such a paper with extraordinary efforts from entities directly connected to the current economic situation

it's based on facts numbers as you all seen in the in the paper statistics analysis uh

the paper has shared the the the common vision and the understanding um uh that all reputable and international organization had uh for iraq and for iraq's future and the problems we are expecting

so it's really important to focus on this on this paper work hard to get it uh on the on the track and work and get this exact success out of it um in the end as they say

it needs uh uh it's it's the results that count how to get those results ensuring safe and fruitful implementation even on an cceptable rate requires significant government efforts at this stage

these efforts should be represented by legislation and implementation procedures covering the gaps in the the existing uh situation

this gap appears actually from changing the political regime we used to have that one-party political regime before 2003 and now we have this this political plurality we had since 2003 until now

at the same time we we kept the same economic system that we have been using for tens of decades now actually

this gap is the source in my opinion as a source for most of these problems we are facing these days um actually

the responsibility that is placed on the government uh we all iraqis and specific iraqi people need to realize that it's big responsibility

corruption in my opinion is one of the biggest challenges that the Iraqi government is facing and should the iraqi government should face and should deal with it uh as uh mr hadley just said uh because it's one of the of the main challenges that uh stopping the the the work of this uh of this paper many international and local bodies experts have uh analyzed and came up with suggestions about how to fight corruption and find solutions for this for this um for this for this problem

but at the end we are still uh as we can see from all daily work on the ground we are still far from uh from solution

the government needs to take effective steps towards finding solutions and and put them on the ground uh on the implementation table uh

one of the key points here and you know the and you see the challenges we are facing you know the forms of tribes

iraq is facing and it's the widely known forms of bribes it's not a secret and

we also feel the touches of these uh corruption uh means everywhere when you go on the ground

it's a long list of forms

on the other hand we should we we see a short list of laws dealing with with corruption and fighting sorry corruption

we can summarize those laws by just a short list as I remember as the the integrity commission law as the uh the board of supreme audits is the informant's rewards

i was still ink on paper nobody use it on the ground and the panel code and

this is a real short list of laws that really doesn't do much in fighting corruption on the ground

on the other hand and one of the most important uh key points here is that iraq and its uh in its battle with corruption will definitely need the international community support and

in order to get that support it needs to be in compliance with the international standards

iraq is a significant to the uh to the eu and convention for anti-corruption that was back in 2007

since ratifying the that that convention back in 2007 iraq has not taken a single step towards legislating lows that covers the gap uh between the the the uh the international standards and the national laws in order to be in compliance with with the provisions uh of that convention and the international standards um and

this is a big gap actually

Iraq needs to take uh real and serious uh steps toward covering this gap and uh and issue and enact a law that that that uh covers all these uh differences between the international standards and uh and the national laws which is really a big gap it comes with uh you know

iraqi for example did not criminalize some of the acts provided for by the by the convention

it did not establish detailed rules related to do to law enforcement and uh prosecution of corruption crimes uh

nor did for international dealings or issues related to prevention of corruption

some of the acts that that are criminalized by iraqi law differ in some details from what is there in the convention such as embezzlement and bribery

so the provisions adopted by Iraqi laws differ from international requirements and law enforcement procedures many of which are not taken by Iraq the prevention measures were also not taken into account by iraq for example the role of the civil society organizations media the community participation and fighting corruption

we are in need of provisions that criminalize acts that contribute to the spread of corruption as well

and also put in place controls to enforce those provisions after we have granted the protective aspects of the legislation

in my view the urgency and and the volume of the effort needed uh to implement the paper which is a unique paper again

it's a very important paper for the first time in in iraq's history

we have enhanced such a such a strong paper that covers all the the aspects the challenges the those statistics those big efforts so it's the urgency and the volume of efforts to implement the paper request collaboration of efforts iraqi people and iraqi government

it's our last chance

it's our final chance actually to make real change on the ground

people of iraq needs to to understand this very well the it's there should be a huge campaign of awareness to talk to people to to make them understand the importance of this paper in order to to join efforts and and get iraq back on the track again

thank you

thank you very much uh hadil

two clear areas there
one is that implementing corruption uh laws and also
communicating to everybody that this is a really important uh issue that we're facing now in terms of the white paper and everyone has to pull their part um

i'd like to introduce lizzie porter from the the oil iraq review and uh monitor and uh


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