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Transcript of Iraq Britain Business Council (IBBC) teleconference November 25, 2020 POST 2

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

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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)

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

lizzy i think you've got some slightly more positive view about what might be coming and and the view from obviously a very significant part of iraq's economy

thank you lizzy

thank you ashley and I apologize firstly for my lighting situation and the power cut that just happened um that is something i will come on to later and power cuts are a feature of life in Iraq um so

i'm going to talk about the oil and gas industry and the role it plays in the white paper

clearly um the industry is a key part of the economy with over 90 of uh the government revenues coming from oil sales as well as being a huge part of the economy

oil and gas is over over-reliance on oil and gas has been part of the problem and

making the sector evolve and developing the sector in the right way is a key part of the solution i'm going to talk

particularly about gas which is and development of the gas sector is one of the uh main thrusts of these suggestions that are put forward in the second part of the white paper um

so in this time of really really deep economic crisis in iraq where Iraq cannot just pump more barrels of oil

it cannot just pump more it cannot export more because of opec plus quota restrictions uh because of the time it takes to increase uh uh production in some circumstances

iraq needs to squeeze more value out of existing products in every barrel that it gets and

one real big red light and big red buzzer in that is is gas is is natural gas um

the gas which is created or produced during oil production uh when you

when you produce crude uh you get gas um as a by-product and

iraq is currently flaring enormous amounts of bad gas um i mean

one estimate puts it at 2.5 billion dollars annually that iraq is losing from flaring the gas

um which for those who maybe don't know the technical parts of the oil and gas industry um these are big towers that you see it next to or oil fields and around oil infrastructure with burning and

that's literally just burning off the gas that is produced um

it's bad for the environment

it's very wasteful

it's kind of essentially burning money um and use endless products that that Iraq could use to power power plants

and mean we have fewer power cuts um and uh

as a source of revenue um

so there are several uh big projects but it's not been they haven't been developed and they haven't moved forward as quickly as as they might have done um for various reasons um

one problem is that there isn't uh incentive in the technical service contracts uh for for um to necessarily

but they govern the relationship between uh the state and iocs to necessarily use as as effectively or as efficiently as possible that gas um

there isn't also political consensus on stopping gas imports from iran which um iraq currently relies on to produce electricity so

there are some projects that are going on at the moment um

there is um the battery gas company which is a joint  venture between uh royal dutch shell mitsubishi and the um south gas company which is state-owned um

there is uh dry gas from a from a field uh at siva which is in basra on the iranian border which is producing but there are lots of potential there is a lot more potential in this field and

things that the uh that the white paper specifically says is that iraq needs to encourage foreign investment in uh gas processing and gas production from the dry gas fields

the one i mentioned at siva there are also um fields in mansuriya in diyala province and um in anbar province

um there is huge potential there to not only stop gas flaring um but use that product to um to supply the power grid which would which would increase improve lives of all iraqis who are currently paying huge amounts to [Music] generator companies to provide them with electricity which doesn't come from the power grid because of the inefficiencies in the power distribution and transmission network um so

there are huge um there is definitely a will within the white paper to encourage investment in the sector to ratify a national gas company law to regulate that sector and um which and it would have massive positive knock-on effects for other sectors like the power sector that that i um uh mentioned there um

i think one thing that's been uh difficult in the past is that there has been the uh developing the um infrastructure um and financing around uh gas project developments

it hasn't been easy for foreign investors to to invest in

it hasn't been made easy and so

i think now with the with the gravity of the financial crisis and the economic crisis that Iraq is going through um it it really needs to uh

there really needs to be uh recognition i think there is that that actually people want to and people who want to invest here needs to be made easy for them to to them to do so

thank you very much indeed lizzy it sounds like there's a sort of quick win there and

it'd be quite good to know from the panelists what kind of priorities maybe we should be looking at or can expect from the government that might be quick wins as opposed to more long-term interacting problems um

the second thing is i'd be very interested to hear about the political scenario because

i believe there may be challenges to the white paper from the parliament and and

you know while you don't want a good crisis to go to waste to force things through there probably are going to be impediments on the way

would anybody like to comment on the practical application of this and the adoption of it by uh the parliament etc

schwann would you like to to start on that one

thank you i don't need to

please we cannot hear you you can now i hope yeah okay great you know

there are different sentiments about this white paper

some people say it's good

some people say it's bad criticize it so others might resist implementing what's in it

the facts of life are iraq is an economic crisis and financial crisis

the second fact is is that it's not the doing of this government nor the government before it

it's this has this is an accumulation of decades of bad management of the finances and the economic sector

now what this government did is it had courage enough to take on it itself after a few months of its inception to put forward this white paper

winston churchill allegedly said once never waste a good crisis and
this is exactly what this government is doing

it's not wasting a good crisis it's taking the opportunity of this crisis and telling the people telling the parliament or the council of representatives and telling the world this is our situation and this is how we want to get out of it

it might be the right way there might be other ways we can modify but there's no up we don't have the option of not doing anything

something has to be done

there are other steps that should follow but i will not get into that

but i think one important thing is the public has to understand that not taking action is not an option

the public has to understand that going through difficult implementing difficult measures will lead to a better life

as all the panelists mentioned just now in different areas and this this has to be made clear to the public so in a in a simple language proves proper engagement through the media and through other channels

because of the public do not accept this and do not understand what the consequences of not taking action will be then i think we are in trouble

i think that will be a priority for for the for the government in this coming next steps

thank you

thank you sean but just to could i press you on the parliament and just explain and process what happens what are the next steps it's been published as a white paper what happens now well the white paper has many many different areas

some are the authority of the government to go ahead with

others require legislation and ratification of certain laws by the parliament uh and the government send it to the parliament to just to make it public and to get political support with that but it didn't also we have to be to be uh i mean honest and frank with about this

the government started implementing certain steps maybe not big enough steps trying to increase their state's revenue for instance by

by canceling all waivers and exceptions for customs that a decision was taken by the ministry of finance lately

trying to improve the business environment by through granting some passport holders of certain countries mainly from the Schengen area visas at ports of entry uh trying to
take biometrics of all government employee employees and this is a long process because we're talking about millions and millions of people uh so they have started the process within what within the areas that are within their authority

other areas will will be need the approval of the council of representatives

the difficulty here is we are getting into an elections period and usually three forms

are are another award for reforms economic reforms are austerity measures

and it's difficult for politicians to approve austerity measures when you are they are heading to elections and

that's why i say it's important to talk to the public to be honest and frank with the public and tell them this is what we are up to this is what we have
to do and not doing it is not an option

thank you

thank you sean would anyone else like to comment on this

frank sorry yep sorry i see high deal i'm sorry ideal okay uh okay um

i think the the the government is now having uh a very good chance to to make real change on the ground

and she sees this opportunity that she's getting it's getting all the support from
from the international community to uh
from the world bank from the uh
the old international agencies and organizations
to create and establish this exchange there are kind of major simple measures that it can take to to put an end to two big problems facing and and get dragging the the country to to a disaster to a real disaster uh

such as such as for example there are simple things that that you may see when dealing with because um you know most of our work is on the ground dealing with with the government bodies with with international companies working in Iraq with uh with iraqi society so we understand those we see those difficulties and we understand uh the background behind them uh

for example we we usually find insufficient transparency in the published reports and information uh on uh by ministries uh that's of course we understand to pass illegal action which leads to losing investors confidence in the entity and the government that he usually deals with

sometimes we find people non-qualified people um uh appointed in in and holding positions uh by which they deal with significant economic uh and contractual uh contractual files

uh important sectors in the hands of non-qualified people and we understand the background uh uh what's behind the scene what brought those people and uh secured their arrival to such positions uh it's also when it comes with opening candles and awarding government contracts there's no transparency and we all understand that it's not really clean and the government needs to take real steps towards putting an end to this

for example um selecting or appointing international companies to take care of of opening this process of opening tenders and qualifying uh companies um

for example also we see double standards neptune and petroleum systems

we see the for example the tax authority chasing small businesses and small companies for taxes and turning its face on other giant companies earning millions and billions of dollars

there's this new concept in iraq about uh finding the vip partner when starting business in iraq and

this is really again a big problem because even when we go and and and uh you know requesting or inquire about the the conditions for registering a vendor with one of those uh iraq industries

people there provide us a long list of requirements provide this and that and then at then you take my advice go and find the right person the right person means that that person

with kind of the influential person that can provide protection to the project that you are uh trying to to to to do to make um these are kind of or samples of of the the the touches of corruption here and there

i think the government can can take serious steps towards that for example it would be good to set specific criteria to restrict participation to public calendars to companies because as you understand corruption for example um again it takes two to two to tango sometimes three

again because uh if there's no company to pay uh they would you wouldn't find a public official to to ask for for something

so if you at least secure security from this side and set specific criteria to at least request companies from countries originally adopting strict anti-corruption rules

countries listed within the least corrupt countries that would put a limit to corruption in iraq also in the agreements that the government usually is a party to or the licenses granted by the government the government should emphasize punishments and penalties that will be imposed on on those companies if the company is proven to be involved in acts of of corruption

i know it's there in the laws but it's it's it's important to emphasize these in in in these contracts and licenses the automation of the state agencies is very important this will help bypass the the manual processes that the public officials often exploit for practicing corruption modalities [Music]

the government should take seriously uh process prosecute the the uh perpetrators of corruption and implement those sentences against them should take it seriously uh because we always hear of stories of of such people uh running away with no  government chasing them and the most important as i just mentioned a while ago

it's very important to enact a law a new law that should include the internationally
adopted standards and fighting corruption

thank you very much so that's a really clear exposition on corruption

frank if i can move on to you i think you had a couple of points to make as well

well i'd like to i'd like to follow up on something ideal said

you know the especially the young people the attitude is that if the government said
something they're lying and so

how do you break through that barrier and i think what is needed is extreme transparency

yeah you know that that we talk e-governance but every contract and who's on both sides of that contract and how much was paid and which should all be publicized in in real time uh

if you're going to build trust it's going to be very very difficult and and extreme transparency is what is needed

as far as what was said about corruption uh we have many experiences around the
world with what works

many many examples of failure

a few examples of success in in sharp reductions of corruption it is if you

if you give speeches and you put up banners and you arrest a few people it's going to have no impact on corruption

it is needed to have a multi-faceted strategy and

one part of it is to rationalize the business regulations

if it's going to take me 160 days to get permission to build a warehouse then that provides a very strong incentive for me to put some 100 u.s bills into an envelope

but if if that can be reduced only 30 days then either i'm not going to pay the bribe or i'm going to be paying a smaller bribe

so one of the one of the com necessary components of an anti-corruption strategy of successful one is to is to transparency and rationalize the business regularly

thank you

thank you uh now we have a question here from christoph mitchells uh who says

does the panel agree that iraq fundamentally has a political rather than economic problem and

if so is the current political system able to implement significant change and

if not is it doomed to collapse so it's a political question there um

I don't know whether harley wants to say something or

lizzy your hand went up thank you

thank you for the question and

'm um i'm obviously uh only one person answering this and so i'm sure there's many many different views on this

i think one of the things that the white paper tries to show is that is the size of the problem um and is trying to and it does that it spends half the papers of laying out where iraq is and one of those things is the size of the public sector how enormous it is

iraq that the government is 70 percent of government expenditures go on paying government workers

that's an enormous amount spending on government sector workers has increased multiple times since 2003 because people keep getting added to the public sector and and

one of those things is there's a there is a belief among some people that the government i deserve a government job

the government needs to give me a job

a government job is a right of passage and

iraqi friends say to me you know people turn down private sector jobs that will pay them three times as much um because they they believe that a government sector job is much more stable

it's going to give me a retirement pension
is going to pay me well

it's going to be secure and stable and

i don't know what i'm getting myself into forever even if it's much much you know much worse off maybe a third of the pay um

it's people are are reluctant in some senses to um go into the private sector because there isn't much of a private sector to go into um so and

there's a and political parties for a long time have used job offers as a way of of dampening social unrest and disquiet and and public anger will offer you know 100 000 extra x you know extra jobs and

that's actually one of the problems that the current government is facing that they are still absorbing previous promises to put people on the payroll so it

yes i think that there is definitely a very large political element in that over a long period of time

you've had the public sector grow to just unsustainable levels where you know either with with the oil price projected at you know yeah 50

i think the white paper says it's going to be fifty dollars a barrel something for 21 that isn't enough uh to cover basic payments for the for the number of people who are on uh the public payroll so

there definitely is um a huge political um aspect to the the problem that iraq is facing so

i'd rather like hadil said you know it's time to communicate uh what people have to deal with and

schwann too maybe there needs to be communication about the private sector and that it's a good place to work

think about entrepreneurialism consider the private sector you know

is there any message about that or we're the only people talking about it

ali i think you've got something i

i really believe that you know the the problem in in iraq is is a lack of management in the private sector

people sort of set up businesses based on who they know and

they go into practices by following certain individuals high level individuals and they

they travel out there they spend their time with them and they whine and dine them and try to reach a solution

in reality there isn't any true entrepreneur who's willing to go in based on their ideas

in other words how can i be creative to develop something and as a result of that the young don't want to work with them because they don't have continuity in earnings

it's only a one-off way of making money

nobody wants to do that and and that goes back to culture you know you re

we really have to stop this thing of of getting intermediaries involved in trying to get projects

we really need to focus on businesses

i have an idea for example be it as simple as selling cakes or i want to set up a jam factory i want to do something else

i don't think you're going to get anybody in any of the private people coming in until you really have radical political solutions

if there are no solutions you're not going to receive any foreign direct investment

people are not going to go and

if they need to know have contacts to be able to go into business they're going to say if i need these relationships to develop a business i'm going to have to have 10 more relationships to be able to get out of my business

we really need to think seriously about how to move forward how to encourage  entrepreneurs to build in iraq and and it goes back to it goes back to e-commerce it goes back to e-government

if you want to go to any political any any any institution government institution you have to stand in line you have to do this you they tell you it sometimes it takes one to two years to get things done

whereas in in places even as in Jordan it's done automatically on the internet

in the states you can buy and sell a house in the uk you can buy and sell a house online

you can't do that in iraq it is so difficult it's so tedious that people won't do it but it still goes back to the fact that we need radical political solutions

i just want to mention one simple thing i don't I know i'm [Music] uh i'm diversing

i'm going to another area but in the case of china everybody thinks china went did  exceptionally well because of bank chai ping and they really took off it wasn't until

and he's known as the economic guru of of china his name was he went up to jain zhang min and said to him i can't solve these economic problems because we're going after second-tier people

we're going after second-tier people

I need to go after the people in the communist party you give me the blessing to go after them then i can take action and he actually got the blessing from gentile men that's the beginning of the growth spurt in china along with a few other things that they did so

we need to seriously think about about how to move forward you're not going to get entrepreneurs in into iraq

or you're not going to get businesses to come into iraq on the con

on the contrary like the young generation they all want to leave they all want to get out and leave and that's where we are today in Iraq

there needs to be a completely radical solution and

i don't know if we can do that frankly because unlike china china paramount believe that they had their own military in their own base we don't even know how effective we can be in resolving these issues

i'm sorry I have to say this but there's a lot of uncertainty there it's um

it's a question of leadership partly isn't it um who would be the person to do this is the current prime minister um also uh you know could there be a sort of big bang like we had in the uk to deregulate

i mean is it does the white paper allow for any radical changes in it

can i just say one thing

i mean when you talk about the big bang in the uk you had the normal economy okay the union was strong etc

but you had the normal economy below the poverty line you have to change the culture as frank and everyone else said people don't want to work in the private sector they don't want to work they don't trust the private sector

you need who's going to lead that who's going to change that

you need to change the change maker yeah

um okay i have another question sean

sorry yes yes just on that i mean you mentioned the private sector and we have to change the culture of the people to to work in the private sector

but to do that in order to do that we need to change work environment within the private sector i mean

first we need to create a private sector that can absorb the workforce

but then also people that go and work with the private sector have to have rights and have to know what their rights are something equal or similar to the to those who work in the public sector and

then and only then the mindset can change because the public sector offers
better retirement
better work conditions
many many other things

while the iraqi private sector doesn't do that so

unless the work arrangement the work environment in general improves and that there is a private sector that can absorb all these millions of unemployed people

what are we talking about thank you

okay um i think we have had an hour on this

would anybody like to just summarize briefly their sense of the white paper where we've got to um and and their outtakes from this and then we'll go on to talk about president-elect biden and the impact that may have on iraq in general so perhaps frank would you like to just summarize a few thoughts on on the white paper

yeah if i yes thank you um you know my my personal evaluation not speaking for anyone else is that it it is an accurate description of the problem

the analysis is at a very high level and

i think the the policies that are recommended are what is needed uh

what it comes down to as we just discussed is is the politics is our is the uh the cor the council representatives the leadership of iraq especially with a an election coming up are they willing to spend the political capital necessary to actually execute these policies

and that is something that i i cannot speak to i'm not familiar with but uh it is uh if executed i i think this is going to go a long way to the long run short run and the long run uh problems facing the iraqi economy

i had another point i was going to make but lizzie made the point and she made it better than i did so uh thank you

okay uh honey would you like to just say a final i just want to say very quickly

if you want to measure success in iraq
it's by creating value for future generations

you need to train groups to be strong managers with specialized knowledges in industry and agriculture

you need to have continuous technology capture in other words you need to really update the technology in these state organizations

you need to have focused education infrastructure laws as is mentioned in the white paper

regulatory bodies related to accountability taxation central bank

capital markets as mentioned in the paper to act independently from government that all have to be harmonized

developing wealth from oil is not considered part of the success of a nation that is already that already belongs to the people

build up industrial agricultural manufacturing bases

impose status to protect these manufacturing bodies

how can you improve imposed status if you don't control the borders when know-how and process innovation is at par with neighboring countries then remove the terrorists and allow free trade

but until that happens until you go back we still go back to political solutions if we don't have the political will and it's not the government

it's not the government it's it's really basically the political will from from parliament uh the uh committee of uh of parliament agreeing with with them and trying to stamp out corruption and frankly i'm very pessimistic about that

thank you very much

hadil would you like to say something finally

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