In 2003 Something Went Wrong in Iraq

Introduction

Iraq belongs to the five biggest countries of the Arab World, situated in the Middle East and bordering the Arabian Gulf. Iraq is neighboring Turkey, Syria, Saudi Arabia, Kuwait, Jordan and Iran and is a member of the Arab League. It has two major rivers, the Euphrates and the Tigris which run through the center of Iraq, originating Turkey, respectively Syria and flowing from the northwest to the southest. The fertile area between the two rivers is called Mesopotamia, in which the earliest high cultures of the Near East originated.

Iraq is a Federal Republic with a parliamentary system.

The Chief of State is the President, actually Barham Salih, the head of the Government is the Prime Minister, the recently elected Mustafa Al-Kadhimi. The north of the country is the autonomous region of Kurdistan, which has its own parliament and its own armed forces. The population of Iraq reached up to more than 39.4 million people in 2019 (Trading Economics, 2019), the capital is Baghdad with a population of 7 million, after Cairo being the second largest city in the Arab World.

(New World Encyclopedia).

Iraq is originally an agricultural country, but since the discovery of the first oil in 1927 its economy has focused almost exclusively on oil exports. After all foreign oil companies were nationalized in 1972 and the oil crisis led to a rapid rise in oil prices, there was an economic upswing in the country from the mid-1970s. A large part of the Iraqi population had benefit from the rapid development.

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The wars as well as the economic blockade during the period between 1980-2003 which had a heavy impact on Iraqi economy, were characterized by technological retardation and poor production. The occupation of Iraq in 2003 increased to economic disaster of the country, still, after 2003, many Iraqis believed that switching to a market economy would lead to an economic upswing. (Musa, 2012).

However, it has faced a number of challenges that have impeded the process of growth and development.

The Gross Domestic Product (GDP) is the monetary value of all goods and services produced in a year. It represents a ‘very important indicator of the economic strength of a country and a positive change is an indicator of economic growth.'(Statista, 2020)

The GDP in Iraq

According to official data from the World Bank and projections from Trading Economics, the GDP in Iraq was worth 225.50 million US dollars in 2019. It represents 0.19 percent of the world economy. (Trading Economics, 2019).

The Iraqi economy gradually recovered in 2019 after the decline in previous years, however, ‘in the absence of structural reforms and accelerated reconstruction, growth recovery may be short-lived’ (World Bank, 2019). The growth is mainly due to an increase in crude oil production (plus 6.3%) and a recovery in non-oil activity. Crude oil production is an important success story for Iraq. The improvement in the non-oil sector is underpinned by better rainfall, improved electricity generation and an expansionary fiscal policy related to higher oil prices in 2018. Higher oil revenues have increased wage costs and public consumption. (World Bank, 2019)

GDP per capita

The GDP per capita is the Gross Domestic Product divided by midyear population. The GDP per capita for Iraq was estimated 4,738 US dollars in 2019. (Statista, 2020).

The Gross National Product (GNP) is the value of all final products and services produced by a country’s residents. It includes personal consumption expenditures, private domestic investment, government expenditure, net exports and any income earned by residents from overseas investments. (Investopedia, 2020)

GNP in Iraq

The Gross National Product (GNP) in Iraq was according to the World Bank lowest in the years 1991 and 2003 and reached its peak in 2016. In 2018 the GNP was 221,328,010,477 US dollar, the GNP per capita was 17,210 US dollar (Worldbank, 2020). See the development of the recent years below.

Human Development Index (HDI)

The Human Development Index (HDI) is a comprehensive measure to assess long-term progress in three basic dimensions of human development: a long and healthy life, access to knowledge and an adequate standard of living. A long and healthy life is measured based on the life expectancy.

The level of knowledge is measured based on the middle school years of the adult population. This is the average number of years of schooling that people aged 25 and over have received in one life. Access to learning and knowledge is measured by the expected school years for school-age children. The standard of living is measured on the basis of gross national income (GNI) per capital. (United Nations, 2019:2).

Iraq’s HDI value and rank

Between 1990 and 2018, Iraq’s HDI value increased by 20.0 percent. ‘Iraq’s life expectancy at birth increased by 4.4 years, mean years of schooling increased by 4.1 years and expected years of schooling increased by 1.5 years. Iraq’s GNI per capita increased by about 35.0 percent between 1990 and 2018.

The Unemployment Rate

Unemployment is measured by people without having work but being available for employment and also looking for it. The unemployment rate is defined as the number of unemployed people in relation to the labor force which includes all people except children and the retired and except others who are not looking for a job. (The Global Economy, 2019).

The unemployment rate for Iraq

Between 1991 and 2019 the average unemployment rate was 8.92% with a minimum of 7.89% in 2017 and a maximum of 10.35% in 1991. The world average in 2019 based on 181 countries was 7.22% (The Global Economy, 2019), so Iraqis unemployment rate is above the world average.

According to the United Nation Iraq is considered one of the most youthful countries in the world with nearly half of its population being less than 21 years old. The unemployment rates among the youth population (15-24 years) dropped from 30% in 2008 to 22.8% in 2011. Women in Iraq are heavily underrepresented in higher positions. Just 18% of women are employed or are looking for employment, and they take up only 7% of employment in non-agricultural sectors. The proportion of women in paid employment in the non-agricultural sector increased from 12.1% in 2008 to 14.7% in 2011. (United Nations Iraq, 2020).

The main sectors of Iraq

Agriculture, oil and infrastructure are the main sectors for trade and investment in Iraq. The country’s natural resources are diverse.

Agriculture is a cornerstone of the Iraqi non-oil economy. About a fifth of the Iraqi territory consists of arable land. Iraq is equipped with two large rivers and has fertile soil in large parts of the country. Iraq’s main agricultural commodities include wheat, barley, rice, cotton and dates. Most large agricultural companies are state-owned. Agricultural output is declining and poor irrigation management, overgrazing and desertification have caused enormous environmental problems.

Iraq has 11% of the world’s proven oil reserves, approximately 112 billion barrels. Oil dominates the country’s economy, accounting for more than 95% of foreign exchange earnings and approximately 75% of GDP. The main oil fields in Iraq are the Rumalia field complex in the south and Kirkuk in the north.

Iraq also has the world’s tenth largest natural gas reserves, at around 110 trillion cubic feet. However, equipment in the Iraqi oil sector has been poorly serviced in recent decades. (International Business Publications, 2012:135).

Trade of Iraq

Iraq has the world’s 43rd largest export economy. In 2017, Iraq had a positive trade balance of 31 billion US dollars by exporting 60.8 billion US dollars and importing 29.7 billion US dollars. (OEC, 2017).

Iraq’s exports are overwhelmingly dominated by oil. In the 1980s its main trade partners were Italy, Brazil, Japan, Germany, France, and the United States. Aside from oil and fuels, Iraq’s major exports were sulfur, aircraft engines, dates, and chemical fertilizers. Its main imports were agricultural products, telecommunications equipment, vehicle parts, and pumps/centrifuges. With the United Nations imposing extensive economic sanctions between 1990 an 1996, almost everything halted completely.

With the advent of the oil-for-food program (OFP) in 1996, Iraq started to export oil again, as well as small amounts of natural gas, barley and scrap metal. However, imports were still greatly reduced and controlled by the United Nations. Imports were mainly food and agricultural products, followed by medicines and medical equipment, and motor vehicles. At that time, the United States was Iraq’s leading trading partner, followed by Italy, France, Jordan and Spain.

After the fall of Saddam Husayn in 2003, the sanctions were lifted. In the following years, the European Union, Turkey, the United States, Jordan and Syria were the main import sources for Iraq. The United States made up more than half of Iraqi exports until it dropped to 42 percent in 2006.

In 2016, Iraq’s main trading partners in 2016 were China (24%), the EU (19.5%), India (14%), Turkey (12%), the United States (9%) and South Korea (8%). Iran is one of Iraq’s largest trading partners and an important investor, although official trade statistics do not reflect this. Iraq currently has observer status with the World Trade Organization (WTO). (Dougherty, 2019:752).

Iraq in the Next 10 Years

Iraq has a geographical location linking east and west, and is distinguished by the diversity of land forms and quality that allow the diversification of various natural resources, such as oil and phosphates, sulfur and others. As far as human resources are concerned, the population of Iraq reached up to more than 39.4 million people in 2019 (Trading Economics, 2019), and the youth category constitutes a large proportion of it, which means that Iraq has a good workforce that represents the cornerstone of construction and progress if it is invested and employed in the right direction.

Iraq relied heavily on oil for having a large oil reserve, so oil became the main engine for most of its economic activities, both commercially and financially. The percentage of oil in the gross domestic product, trade and public finance gives you the true picture of the extent of oil domination over the Iraqi economy and it has become the main engine for it. The contribution of oil is undoubtedly good for the economy. In my opinion, the problem, however, lies in its dominance in the economy within one bad political system, causing many problems like unemployment, poverty, poor education, corruption and disease outbreaks, etc. In order to get rid of these problems that involve oil domination, it would be necessary to work first on improving the whole system, then to use the oil revenues in a manner that leads to achieve economic diversification. The repercussions that occurred on the Iraqi economy in light of the current crisis of the Covid Virus 19 and the following collapse of oil prices that reached record numbers are the best evidence of the actual need to revitalize other economic sectors. This would contribute to provide and strengthen Iraq economically by reducing the risk of sudden economic collapse.

Iraq’s wealth includes agricultural prosperity as the agricultural sector is one of the most important sectors which is a leader in the economic development process in Iraq. The agricultural sector plays an important role in the Arab economies in general and in the Iraqi economy in particular, due to its contribution to achieving staple food, providing income and employment opportunities for a large proportion of the population, and also providing raw materials for many manufacturing industries. Thus, the agricultural sector will be the main influencing factor in economic diversification policies .

In this place I want to mention the environmental factor that in my opinion also plays an important role concerning the future of economics worldwide but also in Iraq. It has become possible to see the effects of climate change in recent years, such as extreme heat waves, desertification and water scarcity across the country. With the exception of the mountainous regions in the north of Iraq, most of the other regions in the country are characterized by a dry or semi-dry nature in which the precipitation does not exceed 150 mm annually (Trading Economics, 2015). For this reason, Iraq relies on rainfall outside its national borders to secure more than half of its water needs, which makes it vulnerable to many challenges in terms of its water and food security, due to its natural and geopolitical dependency on neighboring countries: Turkey, Iran and Syria. Water storage projects in neighboring countries have reduced flow rates in the Tigris and Euphrates rivers, which are the main sources of surface water for Iraq, and may reduce them further in the coming years.

I would like to see Iraq regain its natural place like in the seventies of the last century, as it was an example to be followed by other countries and to be far from the conflicts and wars that devastated its economy and infrastructure. The years will not be difficult for Iraq to rise and face all these challenge. Iraq is the second largest oil exporter and one of the first reserves in the world, that can more quickly than others promote the reality of a economy that has been devastated by occupation and corruption for decades. I myself wish to see this day soon.

References

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