Restructuring of State-Owned Enterprises, Advisory Commission to Iraq’s Council of Ministers Professor Doctor Abdul-Hussein al-Anabki Economic Affairs Advisor 16 – 17 February, 2015 Paris, France

1. Restructuring of State-Owned
Enterprises
Paris, 16 – 17, 2015
Professor Doctor Abdul-Hussein al-Anabki
Economic Affairs Advisor
Team Leader
Advisory Commission to
Iraq’s Council of Ministers

2. Vision:
Turn state-owned enterprises (SOEs) into economic units
operating according to economic and commercialization
principles (profit and loss), with their products being
regionally and globally competitive, adopting excellence and
creativity rules and contributing to the growth and
development of a diversified national economy, as well as
creating job opportunities, employing resources effectively
along with economic efficiency and accountability.

3. Key challenges to restructuring:
 Machines have exceeded product life cycle.
 Lack of power supply leads to interruption of a large part of machine
productive capacity and makes production cost higher.
 Ministries over-dominate administrative and productive SOEs’ decisions;
this is coupled with weak board of directors’ decisions.
 SOEs’ workers have more dependent- than competitive mentalities;
hence, they need to be more oriented toward market culture.
 Products are uncompetitive with no customs protection for domestic
products.
 Surplus/excess workers overburden SOEs, maximize costs and create
fears for investors.
 Reform procedures have lacked seriousness along with resistance to
privatization.
 A legacy of unfriendly business environment does not give distinct
reflection to investors.

4.  Approved restructuring principles:
 Adopting the principle of social burden mitigation - no active SOE’s
workers shall be dismissed unless their entitlements are settled in
accordance with effective laws.
 No specific model per se is valid; SOEs are to be looked at on a case by
case basis.
 Today, the governing factor is financing, while the general budget faces
considerable deficit within conditions of war economy. Hence, focus in
SOE evaluation was placed on their financial position.
 Surplus SOE’s workers is the State’s responsibility not the SOE’s; the
government has paid Iraqi Dinar (ID) 13 trillions in SOE’s salaries over
2003 – 2012; SOEs are most likely non-profitable.
 Privatization is not done for its own sake, but rather in line with
comparative criteria that would make SOEs’ performance - beyond the
State’s control - more economically competitive than under its authority.
 Privatization does not mean sale, as contribution by the private sector -
regardless of such percentage in the ‘management’ or in both of the
‘management and/or equity’ of the SOE - is mere privatization in varying
degrees.

5. Advisers Commission’s Restructuring Team
Restructuring Units at Ministries
Classification of SOEs by
performance, by factory
and by site
Distinct types for
restructuring and
investment
outcome
The Government’s
role
• Mitigation of the social burden
(surplus labor)
• Demand for local product created
• Reasonable customs provided
outcome
With reduced production cost,
SOEs may become profitable
and investor-attractive
Investor and / or
partner, Government
• Licensing rounds for cost-effective
factories and units advertised
• Cost-effective SOEs to be rehabilitated through
the investor
• Privatization – sale to the private sector
outcome
‫ة‬
 Development of
SOEs
 Increased SOEs’
contribution to GDP
Asset Assessment
Division + SOE
Liquidation
• Non cost-effective SOEs to be
liquidated
• Capital to be evaluated at current prices
• Auction targeting the private sector
outcomeClose down non-
profitable SOEs
Working Parties
and Their Roles

6. SOEs not
considered due to
lack of information
-
-
-
-
-
-
-
-
-
-
12
4
2
1
19
SOEs in realty
Ministries
Industry
Electricity
Oil
Transportation
Construction and Housing
Trade
Agriculture
Defense
Water Resources
Telecommunications
Finance
Culture
Health
Education
Total
No. of SOEs
being
considered
71
24*
18
10
8
7
7
6
3
3
-
-
-
-
157
Number of
workers in
thousands
145.4
83
143.6
37
13.7
10.5
4.3
20.5
2.8
18.3
-
-
-
-
479.1
Number of employees in
thousands, above 50 years
in age, and above 15 years
in service
50.7
12.5
86.1
10.3
3.5
4.5
0.4
9.3
0.3
4.1
-
-
-
-
181.7
Day laborers
in thousands
0.9
8.4
9.8
0.6
1.7
0.04
0.1
zero
0.9
0.02
-
-
-
-
22.46
SOEs making
profits, 2013
12
Zero
17
7
Zero
3
2
Zero
3
Zero
-
-
-
-
44

7. • Key recommendations made in the study for addressing the SOEs’ status:
• Maintain profitable SOEs (44), while recommending to have them all undergo
administrative and economic reforms to improve their productivity as indicated in the
study.
• Liquidate non-profitable SOEs (17) and refer them to SOE liquidator; these SOEs have
been rendered ‘no more cost-effective’ according to Council of Ministers’ decision.
• Offer 96 SOEs of different ministries for domestic and foreign investment in line with
the modes of partnership in management and/or ownership; and offer for sale to the
private sector some factories or commercialize certain SOEs (convert them to share-
holding entities) after adopting an administrative reform system, addressing the issue
of surplus laborers and taking productivity improvement measures to make such
structures attractive to investors.
• Develop/promote SOEs’ operations and improve their productivity through a package
of measures relating to administrative empowerment and liberalization of certain
governmental procedures that impede their commercial performance – according to
the study.
• Create business development centers at ministries with SOEs; such centers will
address the issues of surplus laborers. The State will continue to pay the workers
salaries for a while until the centers have introduced new measures.
• Refer some 181 thousand employees, who are above 50 years and have been in
service for more than 15 years, to the ministries’ business development centers, with
a view to address their cases using a package of processes.
• Consider the possibility of dismissing or reducing the number of daily laborers – more
than 22 thousand persons.

8. Proposed implementation mechanism:
• Council of Ministers need to adopt the study and take decision for
implementation.
• A higher committee needs to be formed to monitor implementation of the
measures pointed to SME reform and re-structuring; efforts put forth by the
committee will supplement the efforts directed toward monitoring the
Government Program implementation.
• A council of ministers’ order needs to be issued – forming business
development centers within respective ministries.
• Profitable companies need to continue paying salaries for their employees,
who will be referred to business development centers during 2015.
• The above-mentioned committee will consult the Ministry of Finance to
make recommendations to the Council of Ministers on how to cover the
2015-salaries of the SOE employees transferred to business development
centers from non-profitable SOEs.

9. Thank you for your
attention!