Rawabet Center: Iraqi ministries take strict measures against national industries and investments
- Two days ago [9/13/2021]
Researcher Shatha Khalil*
Iraq imports an annual value of 39 billion dollars of goods that are supposed to be manufactured in it.
The announced government program prepared by the government and voted on by the House of Representatives is to support the industrial sector, which is the same direction as the white paper, which the government considered a path for the advancement of the Iraqi economy.
But that paper is only a paper that has been folded in the records of the House of Representatives, to show the government's not serious intention to solve the problems of the industrial sector, which can greatly contribute to solving the problems of unemployment and poverty and the development of national investments.
What is currently happening is that the Ministry of Oil is placing restrictions in the face of Iraqi industries, raising the prices of black oil on factories.
The processing of dyeing plants with white oil has stopped, the price of kerosene for laboratories is 700 dinars.
The Ministry of Finance / the General Authority of Customs suspended the transactions of industrialists to enter the raw materials.
When the factory owner reviews, he is prevented from entering the department.
The Ministry of Industry: It prevented the entry of raw materials (Noura) into the Thermostone factories, and all thermiston factories in Iraq stopped because of it.
The Ministry of Interior:
Stop the entry of foreign experts to Iraqi factories and not grant them entry visas (multiple feature) as an expert, knowing that they are covered by the Industrial Investment Law and have official books from the General Directorate of Industrial Development and set entry as a visit for one month only, with
the presence of these unjust procedures and many more that cannot be There is talk of an industry and job creation.
Specialized economic studies and reports show that investors in Iraq still face severe challenges in resolving problems with Iraqi government entities, and
difficulties remain related to
irregular and high tax obligations,
unclear procedures for visas and residence permits, arbitrary application of electronic regulations, and the
lack of alternative mechanisms for settlement Disputes, lack of electricity and
lack of access to financing are common complaints from companies operating in Iraq.
72% of the Iraqi state-owned companies are “losing”
Baghdad: Al-Faw port will pave the way for the establishment of a dry channel and will bring great revenues to Iraq.
Nothing is implemented on the ground, and those responsible for managing this dangerous file are far from responding to the obstacles facing the Iraqi industry.
Official sources from within the Ministry of Industry confirm that the total number of factories and laboratories in the Iraqi public sector is 288 factories in all governorates, of which 83 are suspended, varying between the pharmaceutical, chemical, food, textile and other sectors.
In the latest statistics of the Ministry of Planning issued in 2018, the percentage of the unemployed amounted to 14% of the economically active people, who constitute 56% of Iraq’s population of about 40 million people, and that the poverty rate in Iraq reached 26%, i.e. 10 million poor, In fact, the numbers read more than these ratios.
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.
The number of losing companies that have not achieved any profits since 2003 reached more than 46 out of 67 companies affiliated with the Ministry of Industry, in addition to the loss of all companies affiliated to the Ministry of Defense and concerned with military industries, as well as the loss of all public companies affiliated with the Ministry of Electricity.
In Al-Diwaniyah Governorate, for example, the industrial city was established before the American invasion of Iraq in 2003 and it covers an area of about 200 acres.
One of the owners of the stalled factories says that “these factories belong to the municipality of Al-Diwaniyah Governorate,
and the land was leased according to a permanent contract on the condition that a factory be built according to the Industrial Investment Law for the Private and Mixed Sectors No. (20) of 1998,
and after we established a number of factories that were hoped to operate more of at least 500 workers,
but it was disrupted due to the lack of access to the necessary services,
the most important of which is water and electricity that should have been available in accordance with the above law, yet we are forced to pay rent, taxes and other sums to government agencies.”
The Ministry of Industry does not have a comprehensive strategic vision that is prepared in coordination with the Ministry of Planning and other relevant ministries according to market needs and to achieve the goals of sustainable development 2030, and
the Ministry has not kept pace over the past two decades with the requirements of global industrial development by establishing modern factories and new industries and qualifying cadres with unique experiences that keep pace with the rapid changes in the market industries.
There is no policy to protect the private sector’s product and
the instability of the security situation has prevented investors from establishing large industrial projects, and
if they find them, there will be obstacles and the state bureaucracy that stands in the way of any industry or development.
At the level of the public sector, industries were affected after 2003 and factories were subjected to sabotage and looting.
Most government industries stopped and also for reasons of
obsolescence of production lines,
adoption of traditional methods of production and marketing,
lack of energy and
reluctance to adopt modern technologies in production processes,
which caused increased costs and the inability to compete with imported products, as well as the non-commitment of government institutions to purchase local products.
Financial and administrative corruption is one of the most important pests that destroy Iraqi industries for narrow personal interests or external interests that are not in their interest to revive Iraqi industries and stop imports of inferior goods and merchandise.
Corruption has its role and 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 subcontractor or importing, instead of operating their factories and cadres, without effective accountability.
And the political factor contributed to the destruction of the Iraqi industry as a result of the lack of seriousness on the part of the political forces that dominate state institutions in uniting efforts and agreeing to advance the reality of Iraqi industry, and solving the problems that prevent the country’s industrial progress.
As for foreign direct investment policies; The Government of Iraq has publicly and repeatedly stated its desire to attract foreign investment as part of national plans to boost local industries and promote the “Made in Iraq” brand.
Although the Government of Iraq partnered with the World Bank and the Kuwaiti government to host the Kuwait International Conference for the Reconstruction of Iraq in February 2018, the Iraqi government has yet to follow through on commitments made at the conference to reform processes and regulations that impede investment.
Iraq also claimed that countries did not honor their financial commitments.
Also, Iraq operates under the National Investment Law (the Investment Law), amended in December 2015.
The Investment Law sets out improved investment terms for foreign investors, the purchase of land in Iraq for certain projects, and the investment licensing process.
Purchasing land for commercial or residential development is still very challenging.
Since 2015, Iraq has been a party to the International Convention for the Settlement of Interstate Investment Disputes (ICSID).
Foreign investors still face bureaucratic challenges, corruption, and a weak banking sector, which makes it difficult to successfully conclude investment deals.
Iraq's state-owned banks mostly settle the country's public sector payroll.
Privately owned banks were, until recently, almost entirely engaged in currency exchange.
Some privately owned banks have started commercial lending programmes,
but Iraq's lack of a credit control system, inadequate legal guarantees for lenders, and limited links with international banks hamper commercial lending.
There are many factors that negatively affected the decline of the local industrial environment,
most notably the large number of customs exemptions and licenses for imported products in exchange for the rise in the value of the Iraqi dinar against foreign currencies,
in addition to the illegal flow of goods, with the government not controlling a large part of the border crossings and the ports of the Kurdistan region In particular.
Because of the importance of the national industry in the Iraqi economy and its interference in the fate of Iraq and the future of its generations,
here we summarize the reasons for the weakness of the national industry, and how to address it?
1- Weakness of legislative laws, their lack of application and control, especially the law on the protection of national products and the law on customs tariffs, among others.
2- Financial and administrative corruption, which leads to a rise in the production costs of national industries, and this affects their prices and lowers the demand for them.
3- Foreign competition and the practice of dumping policy by the exporting countries.
This is what makes the production of national industries weak and at great costs that are reflected on the consumer, so he resorts to the importer, and this is what discourages national industries as a result of the absence of important laws as we indicated in the first point.
4- There are no plans and coordination between the public and private sectors, and
since the public sector often does not take the cost-for-profit criterion, it will be more expensive and less profitable on the one hand, and influencing the progress of the private sector on the other hand, which adopts the cost-for-profit criterion, when projects are common The public sector, which cannot continue according to economic standards, will crowd out and reduce the private sector, and this will affect national industries in general.
5- There are no solid infrastructures that could be a basis for industries and a strong base for the launch of the Iraqi industry again, because without infrastructure, production costs will rise, its competitive efficiency will decrease, and it will not be able to resist.
There are some remedies and strategies put forward by specialists to advance the Iraqi industry, the most important of which are:
Fighting and preventing corruption by activating the concerned authorities, especially the Parliament, the Integrity Commission, the Office of Financial Supervision and the Judiciary to prevent the occurrence of corruption on the one hand and fight it when it occurs on the other.
Activating the legal and legislative aspect regarding the protection of national industries is an important and significant role in legislation and oversight.
Allowing the private sector to take an active role in leading and advancing the economy, because it is more efficient and more committed to economic standards.
4- Paying attention to infrastructure by directing investment towards it, whether local or foreign, so that it can play its role in reducing the production costs of national industries and increasing their competitive efficiency.
The national industry represents Iraq's economy, which the corrupt hide, so that they can steal money and fake deals.
We mention some of the reasons for the decline of local industries: - The lack of proper planning and the absence of development programs.
The existence of internal and external wills to disrupt the wheel of the national industry to make way for providing a market for the industries of other countries.
The national industry has certainly been a victim of government neglect for years and dependence on the imported product, and
the reasons are many in this field,
the most important of which is the absence of strategic planning, and
the narrow view of the ruling parties that focus on tightening their grip on power, forgetting the most important sovereign pillars of the state represented by the national industry that can achieve self-sufficiency In many products,
this problem cannot be solved in the foreseeable future or even in the medium, because the mechanisms of governance are still the same, and
if they do not change, the country may even import employees, because the absence of factories means the lack of training even in administrative areas that we are not good at. also.
Iraq at the present time is a region that smells of corruption, injustice and nepotism in all its forms, so
when you want to know the reasons for the weakness of local industries, you have to look for the source of this weakness, and
we know that the political class is the main reason, not encouraging local industries and standing with them to try to restore local factories And sales operations in the central markets, and
one of the important reasons in this regard is the lack of qualified people to study these important topics and the lack of influence on the state with new ideas.
These studies will be ink on paper, and the presence of external interference in local industries and an attempt to eliminate the Iraqi economy.
Economic Studies Unit
Rawabet Center for Research and Strategic Studies