VOL. XLVI
No 4
IRAQ
Iraq’s Economic Future In The Post-Saddam Era
At the conference of Iraqi opposition groups held in London in December 2002, two papers were presented on the future of the economy by two Iraqi economists. MEES has obtained copies, and summarizes them below:
“Some Thoughts On The Future Of The Iraqi Economy” By Dr Sinan al-Shabibi
The final result of more than 20 years of war and economic sanctions has been the total collapse of economic development, when compared with the vast potential of the Iraqi economy. Average individual income in Iraq at the present time is equivalent to that in the least developed states. There is a huge need for reconstruction as a result of the war with Iran and the Second Gulf War after the invasion of Kuwait, along with social problems – such as loss of family members, homelessness and forced migration. On top of these are the problems associated with the economic embargo, including the disappearance of an effective middle class. The productive sector of the economy has collapsed because of the lack of opportunities for training. There has been an increasing reliance on finding other means of income – like dependence on ration cards, and the liquidation of savings – none of which contributes to economic output. The health and education sectors are in a state of collapse, as are water and electricity services. Also, debt burdens are increasing, with Iraq unable to meet interest payment – a problem exacerbated by that of war reparations. Added to which there is massive inflation resulting from the embargo and policies to deal with it, while economic relations with other states have become distorted and have moved away from the principle of mutual dependence of interests.
In the transition period Iraq should:
Be allowed to increase oil
exports to capacity of 3mn b/d, whereas today production does not exceed 2.6mn
b/d. These figures do not constitute a threat to OPEC at the present time.
Conclude debt deferment
agreements with foreign creditors and delay interest payments.
Put a halt to compensation
demands on Iraq resulting from the second Gulf War, and negotiate with the UN
to reduce and cancel them.
Urge regional and international society to provide urgent assistance to Iraq because of the social and economic circumstances that it has experienced in the regime transfer operation.
In addition, Iraqi funds abroad should be unfrozen, and the UN Security Council should approve contracts that the Sanctions Committee has authorized under the oil-for-food program, aside from easing the way for outstanding contracts. Above all it should put uncommitted sums from the UN escrow account at the service of the new government. Whatever funds Iraq can gather should urgently be put to use in the following ways:
· Imports – especially consumer goods, with foodstuff as the main priority.
· Social services – especially in the health and education sectors.
· Reconstruction and rehabilitation of public utilities – especially in the power and water sectors.
· A start to the funding of a new program to develop human and technical resources to enable Iraq to bridge the technological gap that has opened up as a result of sanctions and the policies of the current regime.
“The Economic Plan For Change In Iraq” By Dr Sabri al-Sa'di,
The economic plan for change in Iraq relies on the existence of a firm ideological model – basically, the principle of individual freedom. In the context of the economy, this entitles the individual to own the means of production and exchange (internal and external trade), to work and be open to market competition. And in society, the citizen enjoys freedom of expression, assembly, choice of cultures, and ability to practice values and customs. Political freedom, in the context of the plan, means the right of the individual to form political parties, a broadening of political representation (through government and parties) and the peaceful rotation of power.
At the same time the plan takes a practical approach and avoids the temptation to see the speedy opening up of the economy through foreign trade and direct investment before preparing the ground for these measures. For the liberalization of the economy must be accompanied by economic, social and political structural reforms – along with the resolving of the fiscal problems of the government by reducing the deficit in the budget and balance of payments. None of these measures can be separated from the first step of implementing a broad government investment program to develop infrastructure. The plan takes into consideration the particular requirements of society and the economy, and the need to draw up fiscal and monetary policies to find a common denominator between oil revenue and how to use it to improve socioeconomic standards. The plan also takes into consideration, in stages, how to benefit from international economic and technological developments.
The plan rests on two pillars. The first activates the market mechanism and the role of the private sector because it is the most efficient. This can be achieved by structural reforms, alongside infrastructure development. The second defines the role of the state in two inter-related fields: a) to achieve a balance between domestic and foreign macroeconomic plans, and to reduce the government’s balance of payments and trade deficits; and b) to continue with infrastructure and social projects.
There are a number of strategic dimensions to the plan:
At the local level,
recognizing the importance of oil in financing government investment in
infrastructure and social policies. The fact that the central government has
an important role to play does not contradict calls for the expansion of
decentralization in the governorates.
At the Arab level, the
expansion of economic cooperation and trade.
At the regional level,
expanded economic and political cooperation.
At
the international level, securing the flow of oil into world markets will
ensure domestic development and meet the strategic needs of industrialized
states.