The destruction of the Iraqi industrial sector by corruption and mismanagement
- 6 days ago [8/8/2021] Researcher Shatha Khalil*
The Iraqi industry emerged in the fifties of the last century directly dependent on the state in all its details,
but at the present time there has been a great development at the level of all industries and entered a new stage of development and liberalization in trade and the lack of state intervention in the private sector and the exaggerated exchange rates The Iraqi industry found itself in front of an unfavorable climate of chaos, conflicts, parties exploiting the country's revenues and resources, and affiliations outside the borders that took the country's industries from bad to worse.
And after 2003, especially after factories were subjected to looting and many projects that were in place at the time were stopped, and what increased the deterioration of matters was the opening of the borders to imported goods in a chaotic manner and without the presence of a customs tariff on them, which increased the frustration and deterioration of the industry.
All countries except Iraq have paid great attention to their industrial sector, and hastened to develop it, as it is an essential tributary of their development, and with it self-sufficiency is achieved, and it contributes to the development of many other sectors through its products for those sectors such as: agriculture, trade, transport, education, tourism, and others..
The industrial sector suffers from a terrible decline and backwardness at a time when the Iraqi economy is heading towards the spaces of the market economy that rely a lot on active and active productive sectors and are able to create an economic cycle that has the ability to compete and continue, and perhaps one of the most important productive sectors is the industrial sector, where the facts indicate A serious decline at a time when local markets are suffering from the phenomenon of commodity dumping, and the culture of consumption has become prevalent in the absence of local industries, and one of the important sectors is also the private sector.
In the latest statistics of the Ministry of Planning issued in 2018, the percentage of the unemployed reached 14% for the economically active people, who constitute 56% of Iraq’s population of about 40 million people, according to the ministry’s spokesperson, Abdul-Zahra Al-Hindawi, noting that the poverty rate in Iraq reached 26%, or 10 million poor people.
Although the state spent about 120 trillion dinars ($101 billion) to rehabilitate public companies for the period from 2005 to 2014, most of which were funded by donor countries and the Ministry of Finance, it failed to prepare effective economic and technical feasibility studies for most of the partnership contracts it concluded with foreign and local companies to advance In general, factories.
It also did not achieve a qualitative renaissance in these contracts commensurate with the comprehensive and sustainable economic growth.
Rather, most of these contracts caused the continuous loss of public companies and the failure to achieve any profits that would help them grow and develop, as these factories are still unable to secure the salaries of their employees and are covered by the grants they provide. Ministry of Finance.
Accumulated reasons for the delay and destruction of industry in Iraq
Experts believe that the state’s dominance over most industries in the previous decades, the lack of a policy to protect the private sector product, and the instability of the security situation, prevented investors from setting up large industrial projects. At the level of the public sector, industries were affected after 2003 and factories were exposed to vandalism and robbery.
As a result, most government industries stopped due to the obsolescence of production lines, the adoption of traditional methods of production and marketing, the lack of energy savings, and the reluctance to adopt the use of modern technologies in production processes, which caused an increase in costs and the inability to compete with imported products, as well as a lack of commitment by government institutions to purchase local products.
The problem of electricity is a major reason for the suspension of 70% of factories, as its absence increases the productive cost factors for industries, as they need energy sources through which technology development can be made, as they are restricted due to this weakness in energy sources.
This problem has a great impact, as many Iraqi factories have moved outside Iraq, and factories in it have gradually begun to shrink.
The Iraqi industry has not met with legislation, planning, organizing or introducing new technology to keep pace with development, as it has remained old and undeveloped and tends to foreign investment more than local investment, and the latter is treated as the first.
One of the important reasons for the decline of the industry is the banks, which are difficult to identify the methods of modern investment development, as they are still related to the old methods and loans, in which the interest rates are often very high, and that these windows cannot be developed in the field of modern industry of capabilities and cadres And human resources, which works to find reasons for investment by traders inside and outside Iraq.
The government's lack of seriousness in developing this sector is one of the reasons that led to a noticeable decline, as it suffers from the absence of any reform program, so it did not have the appropriate climate for development in terms of infrastructure, financial aid, tax policy with the industrial sector and activating the private sector And restructuring it appropriately so that it can provide a climate for work within the circumstances surrounding it from the lack of electricity and the adoption of a tax policy that directly affects the cost of production and its rise.
One of the bad things is the low price of the importer at the expense of the local product, and the accompanying absence of a customs tariff on imported goods, and this is what destroys the national industry and even the private sector, which requires setting conditions and laws that limit the dumping of poor-quality foreign products in the market, which increases the risk Attracting local and foreign investors and activating the role of modern technology that is determined by the presence of electric energy to benefit from it.
Commodity dumping operations exist in all countries of the world, but each of them has laws governing it in this regard.
Iraq issued Law 11/2010 to protect Iraqi products.
The Iraqi industry needs advanced programs for industrial development and tax lending so that it can keep pace with what exists in the countries of the world.
The state needs advanced projects so that it deserves to support and provide financial allocations to it, and it must be of priority and importance to spend this money on. Technological development, failure of industrialization policies, weak innovation processes, and underdevelopment of qualitative performance in industrial production, which increases the rise in production costs, which weakens the competitive position of the Iraqi industry.
The lack of licenses to import, which is one of the issues that exist in all other countries, yet it is produced, exported and open to imported goods, and the evidence for this is that Iraq obtains its goods in the markets.
Some specialists in this sector assert that if the industrial systems in Iraq had been established similar to what existed in other countries in the sixties and seventies of the last century,
they would have kept pace with the developments that are taking place in the world now and would have become one of the competing countries in the industry.
Industry needs new policies based on liberalizing the economy, trade and exchange rates, which are important things in launching the industry, as happened in other countries such as Turkey and China.
This sector is paralyzed due to the political aspect that parties, contradictions, loyalties and gangs penetrate because of the weak political decision and the centralization is weak as politics plays a big role in influencing it and its products as the industry needs to be promoted as many Iraqi traders are reluctant to undertake any investment projects here because of Political factors, legislation and laws.
On the tax exemption decision for neighboring countries, a member of the Government Implementation Monitoring Committee (Kazim Finjan Al-Hamami) said:
The Iraqi government has hammered a large stake in the coffin of our national industry, referring to the assurances of the manifests department in the Directorate of Kumarak Western Region in its book No. 2350 on 3/31/2021 attached to The letter of the Ministry of Industry and Minerals / Department of Industrial Development and Organization 11935 on 3/30/2021wondering about the justifications, motives, benefits and benefits that Iraq will reap when it fires this way on the future of our industries.
Today, Iraq is in dire need of activating customs tariff laws
With regard to the private sector, despite the opening of Iraq to global markets in 2003 and the lifting of the international blockade that had been imposed on the country since the second Gulf War in 1991, the country is witnessing a continuous economic decline with a significant increase in the rate of poverty and unemployment, and Iraq relies on its budgets The federal government has exported nearly 90% of oil, but the oil revenues were not invested in improving the reality of the economy and advancing it to compete with the economies of neighboring countries, at the very least.
Since 1980, Iraq began to witness a marked decline in the private sector, and the deterioration of this sector continued in the nineties of the last century, following the imposition of a comprehensive international embargo on Iraq.
However, researchers believe that despite the number of economic crises that Iraq was experiencing during that period, the sector The private sector continued to supply the Iraqi market with various types of goods, commodities and foodstuffs, as the factories were in the thousands,
in addition to that Iraq relied heavily on local manufacturing and agriculture to meet the urgent need that was required by the economic situation during the international economic siege, and the decline of the private sector in that period was not Because of the state directly, as external factors and economic pressures on the country forced it to retreat,
but the government at the time succeeded in preserving it from disappearing due to laws that protected the local product through taxes and customs, unlike what is happening today.
Another problem in the Iraqi economy is clear from the lack of compatibility between the public and private sectors, according to what economic experts confirm that the Iraqi economy is in a continuous decline.
In order to be able to find a large number of unemployment in the country and bring about economic development in it, and this is what happened in the eighties in the import of labor and the development of industries that actually exist.
The process of money laundering through industry by 50%, which leads to the sale of Iraqi goods at cheap prices in the market compared to other goods, in addition to the lack of loading on imported materials and goods and the corresponding lack of funding and destruction of infrastructure, which led to the existence of a copy of the license for Iraqi goods.
The industries that are registered by 90% of the projects that are completely disabled and that were registered in the Federation of Industries, such as the cashi industry, sewing, leather, building derivatives, etc. Intense competition between imported and domestic goods.
The Iraqi national industries have received a fatal, painful and devastating blow since 2003 until this moment this morning, Wednesday, March 31, 2021, by a decision issued by the Council of Ministers to exempt industrial products imported from neighboring countries from customs duties.
We do not forget the role of financial and administrative corruption and its impact on the economic reality, as some government companies have taken advantage of industrial opportunities to contract in infrastructure construction projects for state institutions by relying on the secondary contractor or importing, instead of operating their factories and cadres, without effective accountability.
The political factor also played an important role in destroying the Iraqi industry as a result of the lack of seriousness on the part of the dominant political forces over state institutions in unifying efforts and agreeing to advance the reality of Iraqi industry, and solving the problems that prevent the country's industrial progress.
Syria and its relationship to the Iraqi industrial side, as is known, the destruction that affected the industrial sector in Syria after the events of the revolution, which continues to this day
According to official Syrian reports, the damages that have affected the public and private industrial sector due to the war since 2011 amounted to more than 600 trillion Syrian pounds, about 150 billion dollars, at current market prices.
During the war, the manufacturing sector was subjected to massive destruction and damage, and suffered from looting and the transfer of its activities to neighboring countries, at a time when the dynamics of the pre-war economy deteriorated significantly. This is an expected result of any war, but it is surprising and astonishing,
The Iraqi Minister, Manhal Aziz Khabbaz, requested that most of the factories in Iraq, especially pharmaceutical and textiles, such as paper, veterinary and chemical medicines, have stopped, calling on Syrian businessmen and industrialists to work on establishing partnerships with their Iraqi counterparts in the fields of manufacturing and training cadres for the renaissance of the Iraqi industrial sector and the establishment of joint factories in the presence of Raw materials are available in Iraq, along with the development of some industries, such as hardware, electrical equipment and cement, which enable us to establish industrial integration in many fields.
The head of the Iraqi Federation of Industries, Adel Akab Al-Hussein, confirms, "We have 57 thousand factories in Iraq, most of them are discontinued, and we need Syrian expertise to restart them, and we are ready to provide all the necessary facilities," noting that there are many incentives to invest in the Iraqi industrial cities, ?
Official sources confirm the destruction of the Syrian industrial sector, and the minister comes with a request for the maintenance of Iraqi factories from neighboring Syria.
Is it irony, or is the Syrian sector laughed at as destructive as the Iraqi industrial sector?
What experiences do we need, and what renaissance do we need?
In conclusion, as Iraqis,
we demand the protection of the local product and
we demand the state to stop its protection, and to
amend all decisions that will cause the abortion of our industrial projects at the expense of the industries of neighboring countries, and
not deprive Iraq of its customs revenues in hard currency.
Economic Studies Unit / North American Office
Rawabet Center for Research and Strategic Studies