A working paper - the industrial sector: reality and its problems and ways to promote it

(OP-ED) - 21-02-2017 | (Voice of Iraq)

An introduction

The present paper aims to diagnose the reality of the industrial sector and to identify the most prominent problems and obstacles that overall development and growth stands with suggesting ways to promote it, as part of the overall Iraqi economy.

The paper focuses on public policies and actions without going into details because it is not the prerogative of the worksheet. Since the industrial sector, a national economic sectors, it must have influenced the rest of the economic sectors and affect them.
Hence the need to address some of the matters related to other sectors as far as its relationship to the industrial sector. The paper has attempted to address some of the aspects contained in the points specified search for the symposium as attaches to the industry.

1) the overall vision of the Iraqi economy

Iraq's economy is being Rieia economy depends on the production and export of crude oil in the generation of GDP and in the financing of the general budget and a source of foreign currency. Thus, the Iraqi economy, an economy one-sided and suffering from major structural imbalances in the light of the almost complete absence of the commodity productive sectors such as industry and agriculture.

It is in this sense the economy exposed to the outside and is influenced by international economic fluctuations. The significance so that any fluctuations occur in world oil prices is reflected directly on the overall local economic conditions. Also, changes in the prices of goods imported into the country are directly reflected also on the general level of prices and inflation (imported inflation).

Such a reality requires action to address these structural imbalances to achieve the diversification of the economic structure and anchored on the right basis for the springboard towards sustainable economic development to achieve the desired goals within the framework of development strategy adopts a system of economic policies, tools and procedures that chime with that strategy.

2) Industry Sector

Faced Iraqi industry through its various stages setbacks and blows and straight left its devastating effects on the reality and the evolution of industrial activity, beginning with the nationalization is studied for many civil factories in the 1964 process, then the Iran-Iraq war, which lasted eight years, the American aggression on Iraq in 1991 and passing through siege destruction and is globally unprecedented and which lasted for twelve years, and the end of the US invasion of Iraq in 2003 and the overthrow of the authoritarian regime, and even overthrow all state institutions and the subsequent destruction of the burning and looting of state institutions, factories, government and banks, did not spare even the museums and libraries.

For these reasons collapsed and stopped all or most of the factories for work and production, and factories that have been able to address their situation and resume activity, they suffer from the conditions of many problems such as lack of basic services, particularly electricity and production requirements and higher production and private transport fares and wages of labor and other things that are not in costs Saleh productive activity.

In addition to the foregoing, the Iraqi market, opening up wide and chaotic and is responsible for all sorts of goods and without controls or impose customs duties or quality control, quality and at low prices since the US invasion and occupation, which led to the suspension of many factories for the production of non-competitiveness and discharge production.

Most goods entering the Iraqi market, poor quality and sold at low prices, and possibly below the cost of production in the countries of origin, raising doubts about the existence of the case of dumping, in light of the absence of economic policies and the supervision and follow-up and the absence of any economic vision and strategy development.

The economic chaos that prevailed in the wake of the 2003 invasion back in part to the fact that the special knowledge of the Iraqi situation and economic analysis were Mnadmtin the occupation authority That is why the policies followed in a timely manner was a recipe for a form of capitalist economy (uncontrolled) does not reflect the reality of the Iraqi economy.

That has opened wide import everything until the water gate, and without customs duties remember (except for the 5% reconstruction). This has led to the killing of all productive activity in the country is causing unfair competition and unequal. The case has continued in this vein until after the founding of the successive governments.

3) highlighted the problems and obstacles faced by industrial activity

1. destruction and stopped most of the government and private factories during and in the aftermath of the invasion and looting, as well as the aging production lines for most of the factories.

2. Not required for the production of electrical power and irregular processing.

3. Do not provide an appropriate environment for investment activity and industrial, high production costs.

4. opening up the Iraqi market wide open to different kinds of goods and products, including poor quality and low prices and shoddy, which constitute unfair competition for local products.

5. Lack of means of support and protection of local industrial products, in exchange for support and protection for many of the foreign products exported to Iraq, particularly from Iran, Turkey and others.

6. difficult to obtain concessional financing, medium and long-term, local factories to import machinery and capital equipment necessary for the development and modernization of production lines, especially since commercial banks' short-term funding provides only guarantees and interest rates is soft.

7. National Capital escape to neighboring countries due to the political and unstable security situation and the lack of means of support and protection for industrial investment and the lack of infrastructure and services.

8. parking domestic and foreign business interests counter to the interests of the local industrial activity and support of some influential politicians to those business interests that stand in the rehabilitation and encourage local industrial products. This situation has encouraged the entry of goods, which is the economic sense is not tradable, such as building materials, bricks so, because of the high transport across the border costs, as well as the case of cement, which invades the Iraqi market and particularly poor species at cheap prices to the extent that impedes drainage Iraqi cement with good specifications, which forced the local cement factories to reduce Iraq's cement prices for the disposal of production jammed in stores. The high fuel prices for the coefficient of bricks paid to close and lay off workers.

9. Non various ministries commitment to buy Iraqi products and orientation to import a variety of reasons.

10. not to apply the province's commitment to economic, financial and tax policies in Iraq and that lead to the creation of problems and obstacles to the domestic industry, the national economy in general.

4) the challenges and problems that hamper industrial activity

Add to the problems and obstacles the above mentioned there are major and significant challenges affecting industrial activity as well as on economic activity in general and impede its potential to achieve the desired goals, including:

1. system of political quotas partisan and factional and ethnic and sectarian strife, which works to keep the right person for the right place because of the independence of the talented and honest and they do not belong to a different political blocs, which leads to the works of ministries and senior jobs and sensitive task by the losers and corrupt and counterfeiters certificates and who have not any experience or the exercise will reflect negatively on the economic performance.

2. the spread of financial and administrative corruption in various state agencies and weak accountability and punishment.

5) policies and strategies that achieve structural reform activity

That the reform of the economic situation requirements necessitate the adoption of the goals of development strategy agreed to correct the structural situation of the national economy through diversification and development of various economic sectors and raise the proportion of its contribution to the gross domestic product (especially commodity sectors) so as to reduce dependence on crude oil sector and to achieve economic stability and sustain growth by relying the participation of the public and private sectors, as well as the development and expansion of the mixed sector, with a tendency to rely more and more on the private sector in the field of development.

Regarding the industrial sector, the industrial development strategy requires the diversification of the various branches of industry and development to achieve the desired structural changes within the industry and achieve the kind required in the branches of consumer and intermediate industries to maximize productivity coherence and interdependence between these three branches of industry balance.

Such a path requires drawing economic policies to develop and raise the efficiency of oil production sector to contribute to the financing of development, and stimulate the growth and development of the industrial sector through investment and support and collection and promotion of the agriculture sector to support industrial activity in the provision of industrial production requirements on the one hand and the discharge of the production of the industry on the other hand, as well as support for the adoption of the industrial sector financial and trade policies.

And supporting policies of industrial activity is concentrated in the following:

To encourage industrial investment in all three sectors
Facilitate the provision of concessional industrial financing medium and long hope.

The use of appropriate types of support and protection for industrial products on the basis of selective and specific periods of time.

Create the necessary development environment and basic services for industrial activity, including industrial estates and various services.

Issuance of necessary economic legislation to regulate the development and support of the national industry.

Drawing trade policy in harmony with the goals of the national industry and adjust import and provide industrial production requirements and reduce the import of non-essential goods.

Interest in actively standardization and quality control of domestic production and imported goods.

Oblige the region to apply policies and economic, financial, tax and procedures followed by the federal government to achieve harmony rather than conflict, which reflected negatively on the economic performance and the higher interests of the country.

6) strategic vision for the private sector

State announced that under the constitution and the general orientation to adopt a market economy and away from central planning and reliance on the public sector exclusively, as was the case previously.

Accordingly, attention should focus on the private sector and be given the biggest importance in industrial activity and raise the level of efficiency and productivity and the encouragement to enter into a partnership with the public sector and with foreign companies. To facilitate this should issue the necessary legislation and reform of the banking system and enable it to contribute more in the support and development of investment and production.

7) the partnership between the public and private sectors.

The partnership between the public and private sectors is the successful means to promote investment, production and growth of the Iraqi industry, as it works to invest the strengths of both sectors and reap the fruits of that cooperation in expanding the opportunities for investment, production and employment. This can be achieved through this partnership, the following:

1. the establishment of a special production production requirements of the public sector and the private sector to ensure marketing products factories.

2. The partnership and cooperation between the two sectors is also enhanced by the support and encouragement and expansion of the mixed sector and in which sectors contribute together.

3. the need to set up special boards where the public and private sectors is with experts and specialists, academics, policy-making and take the necessary measures to support and encourage the industry and service procedures.

4. Encourage private and public shareholding companies viscous administrative and technical personnel, and private capital in the production and investment.

8) In order to achieve the objectives of the reform in the field of industry and to overcome the obstacles that stand in her face must take a range of measures, including:

The establishment of an economic council is linked to the top of the pyramid in the state evaluates and directs economic policy, or strengthening the role of the advisers in this area in order to play a key role in the study and analysis and direct economic and industrial policies.

Reconsider the tax policy to serve the production process and organize and direct import.

In the case of internal or external borrowing must be linked to investment projects exclusively.

Raise interest on savings ratio to encourage individuals to save and channeled into productive investment.

Anti-dumping cases that prove their presence in the Iraqi market.
The fight against corruption in all its forms in earnest and raise the state administration efficiency and integrity as well as the efficiency of devices.

Work to improve fiscal policies and the development of permanent sources of funding and to avoid resorting to foreign reserves to finance a chronic deficit in the public budget.

Adopt various support and protection policies, including subsidies and tax breaks and provide free services for the industry as well as the use of customs duties and quantitative restrictions even in some cases be required in support of industrial activity in this historic stage.

Oblige ministries to encourage local products and contracts with industrial companies to buy their products, within certain controls in the area of ​​price and quality.

Action to compel the region to apply economic, trade and tax policies pursued by the federal government to avoid a conflict with them and create problems because of it.
Take advantage of the style with the participation of foreign investors, whether in finance or provide modern technology and management.