URESG Seminar: What Constitutes a Regional Economy, Open University in Wales 25 – 26 September 2013

A briefing on regional economies

in post-conflict Iraq

Amer K Hirmis

ahirmis@cbstrategies.co.ukTel. + 44 (0) 7918 913 897

Wednesday September 25 2013

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Structure and Sources

Structure:• Iraq in the global context • Key economic features of Iraq• Key socio-economic characteristics of Iraq’s regions• Key challenges and opportunities for Iraq’s regions, going forward• Summary

Key sources:• NDP 2010-2014; • Outline Spatial Strategy for Iraq, 2011; • NDP 2013-2017; • Various other, e.g. USAID, 2012, ‘Assessment of Current and Anticipated Economic Priorities in Iraq’ (a

report for the PM’s Advisory Commission)

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International perspective, 2007

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GDP Oil exports Non-oilCountry per capita per capita exports

as %($) ($) of total

Indonesia 1919 70 86Algeria 4037 1321 26Iraq 4179 922 22Venezuela 8416 1874 26Mexico 12580 368 85Malaysia 13570 829 86Saudi Arabia 15478 8501 10Norway 53320 17508 32Iraq * 1935 1285 2

* Saudi Arabia's oil reserves ~ 225 bn. Barrels, Iran's ~ 138 bib. and Iraq's ~ 120 b.b.

Sources: OPEC, UNCTAD, WB and, Norway: Oil & gas exports

Iraq within MENA, 2010

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Growth rate6.2% in 20060.8 % in 201012% in 2012

US$ 64.1 bn US$ 144.8 bn

Oil exports = 45-50% of GDPOil revenue = 95% of Gov. Budget

Rate of investment in Iraq, 1949-2010

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Investment (GFCF) in Iraq, 1988 prices

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2010, 96.3%NDP, 2013-17, p. 5

Unemployment, 2011

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Underemployment was at 61.4 %

Male and female unemployment within the 15-29 age-group, was 15.5% and 33.3% respectively

Amongst those with ‘A’ Level equivalent education, unemployment was 12.7%, those with ‘GCSE’ equivalent, it was 24.2%(source: NDP 2013-2017, p. 36)

‘The paradox of the plenty’ Slum in Iraq, Baghdad, 2007

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If it were not for 23 years of wars, “Iraq's GDP could have been more than 50 times its projected GDP in 2010. In other words, (the dividend of peace might have been that) every Iraqi citizen would be earning over US $9,600 instead of the US$2,300” (see: 'Cost of Conflict in the Middle East' by Strategic Foresight Group, January 2009, and www.economywatch.com ).

250 slums in Iraq, the largest in Baghdad, where 1.5-2.0 (some say 3.0) million people live.

US Depression and, and poverty in Iraq?

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Source: GT School of City and Regional Planning &Georgia Planning Association [1920s]

Source: http://www.google.co.uk/?gws_rd=cr&ei=Vak1UvqTMuOg4gTWtoF4#q=images+of+al+mutanabbi+street+in+Baghdad [2008]

A café, and, another café?

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Al-Shabander Café - a Baghdadi institution

Café Central - a Viennese institution

GDP at 1988 prices, 1970-2030 (ID mil)

Trend rate of growth = 5.9% p.a.

•1970-79 Oil boom• 1979-89 Iraq-Iran War• 1991 Gulf War 1• 2003 Gulf War 2• 2005 reconstruction• Risky to assume that long term growth will be sustained. GDP will continue to be oil price-sensitive for the foreseeable future.•Iraq’s GDP is 1/6 that of London; per capita GDP is 1/11 (2012 figures)

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Population Projections in Iraq 2010-2030

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2010 population = 32 million, projected to be 49 million in 2030, a 17 million increase.

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2010 employment = 8 million, projected to be 18 million in 2030, a 10 million increase.

Employment projections in Iraq, 2010-2030

NDP investment allocations of US$ 186 bn. over 2010-14

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Of this, 25.5% to Baghdad,

11.5%, to Mosul and

8.8% to Basra

The NDP and the OSSI

• Reducing uneven (dual) regional growth • Realising a more integrated, sustainable, regional growth• Minimising disparity in the provision of infrastructure and basic

amenities – health, education services, sports facilities, etc.• Containing urban sprawl and the growth of shanty towns• Addressing the problem of desertification …• Strengthening the transport network to link markets and also

promote inter-city mobility• Strengthening capacity for implementing investment

programmes …rising to challenges, realising opportunities

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Poverty, a key constraint to regional growth…

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Hypothesis: the higher the level of poverty, the higher the vulnerability of a region to economic shocks and the less resilient it would be to those shocks. The economic structure might mitigate the impact, depending on the nature of the shock; cyclical, structural (sector-specific)...

% of population

Poverty is defined as not being able to obtain the minimum basket of goods valued by the 2007 IHSES survey at $2 per day/person

Regional employment forecasts, 2010-2030

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Regional employment 2010-2030, Baghdad, Nineveh, Basra, Babil and Sulaimaniya dominate

GDP by region at constant prices (ID mil.) 1995-2030 Base Case

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Opportunities for regional economic growth

• Reducing the number of 12,000 rural settlements through the provision of transport, and key social amenities (argument based on economies of scale and commercial viability)

• Provide improved necessary infrastructure - roads, airports, harbours, electricity, water supply, sewage …

• Establish much stronger synergy amongst housing, transport , social infrastructure and new jobs in designing urban policy

• Commercially exploiting regional resources - regionally (growth poles/clusters and ‘tax-free zones’ of economic activities?)

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Uncertainties about outcomes?

• There is no expected measure of compliance with strategic investment objectives, and no clearly actual prescribed roles for public, private or parastatal entities. (USAID, 2012, p. 3)

• Current GoI management of the economy often perpetuates state-centric approaches to economic management. Crippling bureaucracy has maintained the fragmentation of the national budget, undermining government policy coordination

• Capability to undertake project ex ante appraisal / ex post evaluation, is very weak (by MoP candid admission), and Iraq suffers from low rate of implementation (60% at best), partly due to absorptive capacity constraints…

• Political decentralisation vs. regional economic growth

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Summary

• More than two decades of wars and economic sanctions have left Iraq and its regions much worse off than it was prior to 1980

• Regional duality, inefficiency, ineffectiveness and inequality are deeply entrenched, and may remain a characteristic of the regional economic scene in Iraq for the foreseeable future

• Oil revenues provide a massive opportunity to create new jobs, provide basic amenities, alleviate poverty and engender economic growth and associated social changes. The diversification of the economy is critical

• There are serious barriers, with negative effects on inducing regional economic growth, including the lukewarm participation of the private sector in long-term, lack of security, crippling bureaucracy, corruption, all hindering the commercial exploitation of vastly available non-oil natural resources in Iraq

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THANK YOU