Government consultant: The agreement with China set a ceiling of 10 billion dollars

 Government consultant: The agreement with China set a ceiling of 10 billion dollars


 22/12/2019

Papers in international development cooperation

M *: An economic viewpoint
Dr.. Nabil Al-Marso
Iraqi Agreement
Y

12/21/2019








P-Chinese

In the context of the heated debate on the economic feasibility of the economic agreement between
Iraq and China signed between them on 9/23/2019 and how important they are in Emaar
And the development of the Iraqi economy revolves many confused questions looking for specific answers
From the political and economic decision maker in Iraq, including:

 What they included
Economic agreements signed by Iraq with China? And why not publish those
The agreements are on the official website of the Iraqi government as are the agreements
From the oil licensing contracts to this day? What are the
And previous decades began
Mechanisms for implementing these agreements? What are their sources of funding? 

Is the Iraqi fund
Planned to be implemented, which will be allocated 100 thousand barrels per day of exports
Will China have enough oil to pay China’s dues? And it will be this
The fund is part of the Iraq Reconstruction Fund or separate from it? What a tale
Sovereign guarantees pledged by the Ministry of Finance? Doesn't that mean Iraq?
Will he pay off part of his obligations by borrowing from China? Will it be implemented
China projects in Iraq as an investment or a contract? Will companies be implemented

The Chinese direct projects or they will refer them to secondary companies because of
Poor investment environment in Iraq? Finally, Parliament approves of this
Agreements?

We will try, despite the scarcity of information available on this answer agreement
On some of the questions that were asked for the purpose of clarifying the positive aspects
The negativity in this agreement.

Initially it can be said that this agreement cannot be activated unless it is ratified
The Iraqi Council of Representatives, unless preceded by the Legislative Council Act
The agreement provides Iraq with financial obligations amounting to about $ 4 billion
Annually, which is equivalent to approximately 5% of Iraqi oil revenue, which is the same
Allocated in the Reconstruction Council Act, which the government submitted to Parliament
For the purpose of its legislation.

How the agreement works

1. Establishing a reconciliation account that includes Iraq’s 10% deposit
The revenues of Iraqi oil exports monthly to China and oil exports
A daily 100,000 bills for two Chinese state-owned companies (not mentioned)
Their name (, within Iraq’s share in OPEC, not outside it.

2. The second account is used for hedging purposes and is designated to service debts when borrowing
From Chinese banks in case of insufficient financing with net returns
Oil exports earmarked for project implementation by Chinese companies
Implemented or to be implemented under the agreement in Iraq. The mechanism requires
That Iraq puts in the fund the equivalent of 150% of the value of debt service
Implications of the projects for the next 6 months.

3. The third account represents the Iraqi side’s contribution as a percentage of loan amounts
Iraq will receive from Chinese banks.

As Iraq will always receive credit equivalent to $ 8.1 billion
Within the credit limit of $ 10 billion, Iraq contributes to it
15% to pay interest and installments on the outstanding debt, while the other 85%
The remainder represents the net credit or borrowing provided by the Chinese side of
Through loans provided by Chinese banks to the contracting companies at interest rates
competitive.

4. The investment account, as any excess Iraqi funds will be placed in this account
To be used to finance projects in Iraq by Chinese companies or
International or processing companies.

The positive aspects of the agreement

1. The agreement provides one of the important keys to developing the Iraqi economy through
Take advantage of the management and modern technology packages that companies offer
Chinese.

2. The agreement provides the financing required to complete a package of projects
Strategy in Iraq.

3.The process of Iraq joining the Silk Road is facilitated by investments
Chinese in road related infrastructure.

4. Contributes to the diversification and strengthening of Iraqi economic relations with the outside
Through openness and cooperation with the second largest economy in the world.

5.The extent to which this agreement will be used depends on a good project selection
Which should be able to boost and diversify GDP
And providing job opportunities for citizens.

The downsides of the agreement



1 - The exacerbation of the Iraqi foreign debt and increasing its burdens on the Iraqi economy
Heavily indebted, as Iraq currently pays about $ 10 billion annually in installments
To service his debts will increase a lot when implementing this agreement. The agreement is only
An additional debt to be borne by future generations at a time when we do not need dumping

The country has external debt, especially since this debt is linked to one country and does not allow any
A measure of flexibility for the economic decision maker, as this is a large amount of debt
The consequence of this agreement is only executed and operated by two Chinese government companies
Chinese banks are known for the lack of sobriety.

2. The monopoly of the two Chinese companies to work in Iraq may lead to achievement
Projects that are not at the required level in terms of quality and performance on the one hand
And it leads to the absence of competition between companies for the best offers
For Iraq, on the other hand.

3. This agreement will bring Iraq into the US-China conflict
They are locked in a trade war raging between them, and they may also enter it in the race
Among other adults, Iraq is the biggest loser.

4 - Chinese companies receive unforeseen profits and savings that are greater
Much of the implementation of projects through local financing and the contracting method
The implication is that the Iraqi economy will incur new costs that could have been avoided
If Iraq were to use its great revenues to achieve economic development instead
Of wasting and wasting an important part of it in unimportant fields, or wasting it through
Great corruption in Iraq.

The bottom line is that this agreement may represent a step forward in developing the economy
If the Iraqi decision-maker is better to employ it, he must avoid exaggeration
The exaggeration in describing this agreement as the only savior that will transport Iraq
From a state of underdevelopment to a state of growth and development, due to what is said to it
Falsity of investment flows to Iraq, amounting to $ 500 billion. that
The basis for the development of countries is the activation of domestic investment while benefiting from

External factors, including this agreement to promote the pace of growth and development, not
Alternative about it.

(*) Professor of Economics, University of Basra
Copyright Iraqi Economist Network. Republishing allowed
Provided that the source is indicated. December 21, 2019

http://iraqieconomists.net/