Dr. Mahdi Al-Hafedh “Rebuilding Iraq with Iraqi hands” Conference Organized by IACCI July 2007 Prospect for Economic Growth in Iraq

1. In Iraq, there are many power resources making for the availability of rich economic growth. Iraq has the third largest oil reserve in the world, huge water resources and human resources estimated at 8 million people. A good investment and active management applied to these resources may help Iraq to overcome the transitional period which it faces in its previous position as a country of medium income. 2. To achieve this comprehensive transformation it will require: – Settling the internal conflict and establishing security and stability while working through the process of rehabilitation. – Progressing economic reforms to transform a state economy into a free economy seeking to increase the economic growth and to expand the national economy. – Being free from extravagant reliance on oil export incomes and carrying out the variation of national economy.

3. These goals and challenges urge the needs of active options on the general political level. They require covering the following fields: – Increasing the petroleum product and export to new levels as a basic motive to increase the economic growth in the country. Unfortunately, the Iraqi progress in this field is still lower than the required level. This situation needs a group of necessary procedures, e.g. increasing the investments in the petroleum sector and issue of a law for oil and gas which insures establishing an active legal frame to manage the petroleum operations and to develop the investment forms. – Developing non-petroleum economic sectors to create a varied and balanced economy which may undertake fulfilling the needs of the local markets for the agricultural, industrial and service products. It may also clear the way to direct economy exportation. – Creating a suitable investment atmosphere by reforming the legal and institutional frames at the fields of finance, trade, banks and insurance sectors etc…The law of investment which legislated months ago may achieve this purpose if it is activated well.

4. The well-known high percentage of unemployment and poverty problems are forming a basic obstacle to the economic growth. Hence, the continuous deformities in work market are aggravating the situation. The reduction of employment opportunities and the annual increase in work market intruders, who are about 200,000 people a year, are the main reasons for this deformation. The new “young” generation has added to the relatively unemployed youths from whom contribute no benefit with their energy.

Some research estimates the ratio of those in extreme poverty in Iraq to be about 10 %. There are other social groups (whose ratio is about 12-15% of the population) liable to descend to a similar level. These groups include a wide range of unemployed youths, ex-soldiers, people displaced from different parts in Iraq and militia individuals. The unemployment ratio is about 30%, which doubles the average unemployment in the Middle East and North Africa. Also, there is a decrease in manpower of more than 30% while the contribution from women does not exceed 19%. This requires serious addressing.

5. There is an urgent need to adopt a new strategy for developing the private sector. The transitional stage in the market economy cannot attain its aim unless this matter is solved to guarantee that the private sector gains its leading role in the national economy. This point is directly connected to reforming the state sector through rehabilitation and allocation according to economic feasibility criteria in addition to proceeding to develop the environment of investment and work market. 6. Success at economic reformations is the second basic element towards creating a new economy. The reformations started with many cardinal fields such as reforming the financial/monetary policies and initiating new laws in the fields of trade, banks, labor, etc. The most important thing is to remove the disorder in the state budget and to solve the problem of subsidy to reduce public expenditure and diversifying the sources of general budget funding.

7. Undoubtedly, the external assistance has a special importance in financing the economical activities and in rebuilding Iraq. In spite of the essential progress in this field, it is continually important to improve the management of these assistances with common vision between the Iraqi side and donor countries and institutions. This is an important task for the future of economic policy. 8. Undoubtedly, these big challenges pose a need for crystallizing a clear future economic vision, providing effective implementation mechanisms and tools by governmental/businessmen sectors, and providing real support from the donor countries and institutions. The core of this vision is to reform the state’s institutions/organs, develop its executive energies and fight financial/administrative corruption.

Dr. Mahdi Hafidh “Rebuilding Iraq with Iraqi hands” Conference Organized by IACCI July 2007 Challenges of Economic and Growth Reform