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Political Progression, Economic Stagnation and the Strategic Opportunity


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  • 1. Political Progression, Econom ic Stagnation and the Strategic O pportunity Mohammed A . Field A l- K hafaji Iraqi Institute for Economic Reform PRESENTED AT 6TH ECONOMIC FREEDOM IN THE ARAB WORLD Beirut 20 – 21 October 2011
  • 2. Content  The indicators of Political progression and economic stagnation  Challenges facing the Iraqi economy  Importance of Rule of Law & Good governance  Democracy and Economic prosperity
  • 3. Has Iraq Achieved political progress? Iraq made significant political achievements in comparison to other Arab countries, and this has manifested in for example:  Referendum on Federal Constitution,  Elections at National and sub-National Levels
  • 4. Has Iraq made political progress? Source:Freedom in the World 2010: Table of Independent Countries
  • 5. Significant Economic Progress?  Decrease in unemployment from 51% to 15%,  Decrease in poverty from 54% to 27%, Increase in electricity production from 3500 to 7500 MW,  Increase in GDP per capita from $3000 to $ 4000.  Decrease in inflation rate from 65% to 6%,  Increase in access to safe drinking Water from 30% to 70 %,
  • 6. Economic Stagnation A significant proportion of citizens lack access to basic services. Lately the grievance of citizens have escalated to protests calling for basic services.
  • 7. Family Satisfaction: survey of Public Services in 2006 Percentage of unsatisfied Families with public services  Health: 30% on average Crosse the board not satisfied with heath service  Education: 40% on average cross the board not satisfied with education service  Other Services: 60% on average not satisfied with other services (e.g. Electricity, water, housing)
  • 8. What is the relationship between Democracy and Economic prosperity ? There is no direct relationship, but evidence internationally, linking economic prosperity to an environment where there is respect for the rule of Law.  Yes, Democracy does provide better environment for economic growth providing there is respect for the Rule of Law
  • 9. Economic & Social Challenges What are the facts of the Iraqi Economy? Damaged SMEs, and ineffective Public and Private sectors  Poor business environment for economic and investment  Poor social structure and ineffective educational system  The absence of good management of the economy Lack of respect for the Rule of Law and Good Governance
  • 10. Obsolete System and Regulation  Complicated Government routine,  Non-clarity of roles and responsibilities and  Overlapping of jurisdictions. Process of Procurement at Basrah Province (as example). Advertising Receiving Issuing the offer contracts
  • 11. Absence of Rule of Law & Good Governance  Participations It is very  Rule of law hard to  Transparency find any  Responsiveness of these  Consensus orientation elements  Effectiveness and efficiency in place  Accountability  Strategic vision  Equity
  • 12. Weak Enviroment for Investment Despite good investment legislation and incentives to do business, there a number of obstacles: Government Bureaucracy, lack of commitment and management skills; The absence of Insurance Companies, responsive Commercial Banking; Corruption .
  • 13. Total Revenue in 2011 is $ 69,175 Billion
  • 14. Total Expenditure
  • 15. Revenue, Expenditure & Deficit for 2011 ($Bn )
  • 16. Is the Federal Budget really in deficits? Federal Budget 2006- 2009. Total Government Revenue $210 Billions Allocated spending $211 Billions Actual spend $182 billions Notes: Investment Budget execution rate is 58% Operational budget execution rate is 91%
  • 17. Financial Execution Ratio of Capital Expenditure for 2010
  • 18. The Relationship between Economic Development & Rule of Law Kaufmann, D. and A. Kray (2002), ‘Growth Without Governance’, World Bank Policy Research Working Paper No. 2928, November.
  • 19. The Relationship between Economic Development & Rule of Law There are international evidences to suggest:  Creates confidence between the citizens and the state/ organization  Encourages transparency and reduces waste of resources  Provide an incentive to financial institutions to lend, and  Encourages investors to provide liquidity and technology transfer
  • 20. What is needed? Culture/Religion: Values Code of conduct Strong Economy Better State: Rule of Law & Environ Formal Education ment for With Good Governance positive rule Business spill over Accountability Civil Society: Voice for the People
  • 21. Democracy without Rule of Law is a bird with one wing