Making Iraq Great Again: Can Protectionist Policies Solve the Country’s Worst Problems?

Iraq desperately needs more private sector growth, in order to provide jobs. Some new anti-import policies seem to be working.

 

Mustafa Habib, Baghdad

Over the past few weeks, protectionist policies instituted by the Iraqi government have borne fruit. The Iraqi Ministry of Agriculture announced last week that, for the first time in recent history, wheat production in the country had exceeded demand.

Iraq had produced 4.75 million tonnes of wheat this year – for the first time since 2003, and the US-led invasion of the country, Iraq had achieved self-sufficiency in this area.

Wheat is just one of the 16 agricultural crops that the Iraqi government decided to stop importing. The others include tomatoes and fruits, and the move was seen as a way to force the country to become less dependent on exports and to encourage job creation. For locals, domestic fruits and vegetables were available at markets in number this season, something that would have been unusual in the recent past.

Earlier this month, the Iraqi government also decided to stop importing eggs and chickens from neighbouring Turkey and Iran. Pasta was another Turkish product that was no longer welcome. This caused the Turkish ambassador to demand a meeting with the Iraqi minister of agriculture but, in reply to complaints, the latter said that local production could cover local demand.

It is not only in the agricultural area that Iraq is instituting these kinds of policies. In January 2016, the previous government, led by former prime minister, Haider al-Abadi, made what was described as a historic decision to ban the import of cement, most of which comes from Iran. Prices fell by almost half, to US$50 a tonne. Cement originally cost around US$90 a tonne and builders also thought the Iraqi cement was superior to imported varieties.

“After the decision was made to ban the import of cement, we believe it led to a further US$600 million being spent on the product locally,” suggests Hussein Mohsen Al-Khafaj, manager of the Iraqi General Company for Cement.

“In the past few months, after the government introduced these import bans, my staff has gone from 15 to 25,” boasted Salman al-Tai, the owner of a small factory making bricks.

After 2003, Iraq was thrust into the globalized, free market system after decades of having been a fairly protected and socialist state run by autocratic former leader Saddam Hussein. His government tended to impose big import duties and also suffered under sanctions, which meant domestic production thrived. After US forces entered Iraq in 2003, overthrowing that government, the country became a marketplace for the formal and informal transfer of goods from throughout the region.

But opening up the country like this was not well thought out, argues local economist Anwar Saeed. “Iraq’s transition to the capitalist system saw a near total collapse of local industry and agriculture,” he told Al Menassa. “Thousands of factories stopped working almost overnight and farms turned into arid wastelands. All of this made Iraq dependent on imports, which devastated the economy further. And it poses a serious security threat,” Saeed noted.

The success of these protectionist policies may also be having a positive impact on one of the country’s most pressing problems: unemployment. The country runs as something of a rentier economy – that is, all of the nation’s income comes from the production of oil, the proceeds of which go mostly back to the government. The government then disburses these funds through the national budget, often by providing civil service or military jobs. In fact, the Iraqi government is the biggest employer in the land – but as the population grows and oil revenues have fluctuated, even the government is running out of jobs to hand out.

In 2013, the Iraqi government offered locals 100,000 jobs. In 2018, due to budget cuts, thanks to oil prices and the cost of the security crisis caused by the extremist group known as the Islamic State, they offered 30,000. This year, they have managed to introduce 65,000 vacancies, as oil prices have recovered. But it’s still not enough to employ all of the Iraqis aged between 18 and 30.

Often it is these young men, who are unable to marry or otherwise participate fully in society because they don’t have jobs, who end up in anti-government protests. Thousands of science and engineering graduates have demonstrated outside government ministries, demanding jobs that are just not there.

Growth in the private sector is needed urgently.

Not everybody is happy about the positive news on protectionist policies though. During May and June this year, there were a wave of fires on farms, often targeting wheat and barley fields. A source in Iraqi civil defence, who was not authorised to comment, told Al Menassa that there had been 178 fires set in the space of two months.

Various explanations were given, including extremist attacks and the very hot weather. But as one politician put it, those who benefit from a corrupt system and illegal trade probably have the most to lose if Iraq becomes more self-sufficient and stops importing so much.

 

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