Saturday, December 09, 2006

More money to the people.

According to a recent paper published last November by Dow Jones (don't have a link, read a summary on paper) after the world economic forum in the dead sea, Iraq's income from oil exports for this year was at 35 billion dollars with a 14.3% increase from last year's total.

And that if oil export levels retain the current level and under stable prices, the coming year will witness a record income that was never reached in the history of modern Iraq and revenues will jump up to 40 billion dollars; a huge figure given the humble plans of the government and a figure that will put the government in a position where it must come up with new and ambitious plans to match the new revenue figures.

In fact and from what can be read in papers and heard from official statements it seems most government departments failed to spend the funds allocated by the government for those departments to execute their projects.
That's not because of security challenges only since there are several regions in the country that are relatively stable and where work can be done but more because of bureaucracy and corruption that make it extremely difficult to implement plans and make sure the money is spent in the right direction.

I think this was what pushed the government to announce a number of new measures to cope with the condition, perhaps the easiest measure to come up with was to announce plans for massive raises for civil servants; according to al-Sabah the raise will be as high as 60% of current payments in some cases, especially to those with lower incomes.

Another announcement followed soon, yesterday al-Sabah brought the news that the parliament is discussing a suggestion to set aside 30% of oil sales income to distribute among the citizens of Iraq. The draft law sets 3 classes of payments according to age and subsequent needs and responsibilities; from one month to 6 years, from 6 to 18 years and the third one 19 years and older.
People who migrated from Iraq, those with salaries higher that 1 million dinars/month and convicted criminals will be excluded from the payment program, the report added.

The people here met the news with some delight, hope and some skepticism too although the announcement came through the government's paper.

If this plan comes to materialize I think it can reflect positively on the security situation to some extent. The economy is part of the problem and also part of the solution and the government should move forward with reforms that involve economy and infrastructure as well as, of course and above all, security.
I personally like the idea of distributing the money directly among the population because I believe the people are more capable of making good use of that money than the government and instead of having billions lost to corruption and mismanagement that money will be used to revive the market and reduce the government's control over the economy. Plus, it will give people the sense that they do have an actual and visible share of their country's riches.

The private sector in Iraq had witnessed giant leaps immediately after the fall of Saddam; that could be seen in the form of the thousands of private businesses that were established in the course of the past three years and that had a direct positive effect on the standards of living after long years of deprivation.
It's worth mentioning that between 1946 and the beginning of 2003 a total of 8374 businesses were registered while between April 2003 and the end of 2005 more than 20,000 have been registered. During last month alone 286 new businesses were added.
Such statistics seem quite extraordinary under the current security situation which sadly continues to overshadow and limits further improvement of this aspect of life in Iraq.

On the other hand, the exchange rate of the Iraqi dinar improved significantly in the past few weeks and is now at 1410/$1 instead of 1480/1$ in early November. I am no economy expert but this looks like a good sign; it improves the purchase ability of people who get paid in dinar, which is the vast majority of course and at the same time it serves to reassure the people of the value of the national currency.

Let's imagine if the government intensifies its efforts in this direction and takes some candid and well-studied steps to offer a convenient environment for business and investment particularly in Baghdad, the heart of the country's economy. A lot of progress can be made, especially that the foreign investment law has been instated and approved which by the way looks like a good paper. This economic activity can move Iraq forward in a matter of few years and the country can catch up with what it missed.
The potential is huge; a stable climate is the key to unleash that potential.

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