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The role of the private sector in Iraq: marginal or real?
Tuesday 05 February 2020
At a time when the private sector plays an important role in light of the supremacy of the capitalist system, it is less important under the rule of the socialist system, because the former regards it as a major pillar in the economy and the second regards it as a secondary one, according to the economic thought that springs from each system.
Given the close interdependence between politics and economics, we always notice that the socialist economic system grows and develops under the totalitarian political system, as is the case of the countries of the former Soviet Union, as well as the opposite, the free economic system grows and develops under the democratic political system, as is the case of the United States, Indeed, the second indicates that the second is better than the first because it still exists and is spreading globally.
Iraq is among the countries that adopted and adopted the socialist system from the fifties of the last century until 2003, when the United States intervened to topple the totalitarian regime politically and economically, meaning that the socialist system continued for more than four decades, which had a great impact in impeding the economic transformation, from State to the private sector, later. This made the role of the private sector in Iraq marginal, not real, as will be evident by examining the indicators shortly.
Why did it have a great impact in impeding the economic transformation?
The adoption of the socialist system by the state means that the state plays a major role in the economy, through its conduct of most economic operations starting from ownership and through production, distribution and consumption and ending with export and import, this role contributed to the emergence of an economic culture in society that is dependency culture and dependence on the state instead of A culture of productivity and self-reliance in the conduct of its economic affairs.
Not only that, but the long term of the socialist system in Iraq contributed to embedding the dependency culture of society and dependence on the state, it is difficult to get rid of it because "someone who grew up with something young on it", it is not enough to get rid of it by dropping the top of the pyramid represented by the totalitarian system in general and socialism in a way In particular, it must be removed from the base of the pyramid, that is, work at the beginning on the social transformation in the field of economic culture, get rid of the culture of dependency and replace it with a culture of productivity and self-reliance instead of dependence on the other, whether it is the father or the state.
Sudden projection and adoption
In addition, the sudden and dual overthrow of the totalitarian regime in Iraq and the sudden and double embrace of democracy and the market also means the enormity of the dose received by the Iraqi society, which it did not bear, which led to the creation of the disturbances that negatively affected the economic transformation process, because this transformation was not prepared in advance So that it can be received smoothly and seamlessly by the community and interact with it to finally gain its advantages.
Adopting the socialist system, the emergence of a culture of dependency, its continuation for a long period of time, rooting the culture of dependency, and its overthrow in conjunction with the overthrow of the political system from the top of the pyramid without the base of the pyramid, and its replacement by the market economy system in conjunction with bringing democracy to the level of the top of the pyramid without the base of the pyramid. These are the reasons that hindered the process of economic transformation, from the state to the private sector, and made the latter's role marginal, not real, in the Iraqi economy.
Indicators of marginal private sector in Iraq
And we can refer to the most prominent indicators that show the extent of marginalization of the private sector in Iraq through the following:
First: The Index of Economic Freedom, the private sector cannot take its real role in the economy unless there is sufficient economic freedom. Although Iraq has adopted freedom economically since 2003, on the ground it still suffers from weak economic freedom due to corruption and the difficulty of the business environment, as it ranked 168 out of 180 countries in the corruption index, and 168 out of 190 countries in the ease of doing business in general 2018. Both orders contributed to the difficulty of communicating reliable data, which made Iraq not included in the index of economic freedom index, especially after 2003 [i]
Second: The ownership index, private ownership is one of the main factors that encourage the private sector to economic activity. The more the private sector has the right to own the means of production, the greater its role in economic activity. And since the state owns more than 80% of the land [ii], which is one of the most important means of production, and its ownership of many operating and discontinued companies, it also dominates the banking sector in large measure, by virtue of several indicators, most notably, the assets of government banks are greater (90%) of Private bank assets (10%) of all assets in 2016 [iii], so the role of the private sector in Iraq was minimal.
Third: The indicator of the private sector’s contribution to the gross domestic product, the oil sector occupies a large proportion of the Iraqi GDP, which exceeds the 46% of it if the proportion is taken from the whole product, and exceeds the 66% in 2018 [iv] if This percentage of the commodity sectors was calculated out of distributive and service. Since the oil sector is controlled by the state, the local production is led by the state through oil, not the private sector.
Fourth: The index of the private sector's contribution to merchandise exports, we note through the trade balance that oil exports dominate merchandise exports, as oil exports (crude oil and oil products) constitute 99.85% of merchandise exports [v], and since the state dominates exports Oil, so the private sector contributed to commodity exports with only a very small percentage.
Fifth: The private sector’s contribution to fixed capital, the proportion of the private sector’s contribution to fixed capital formation was approximately 59.77% of the total fixed capital formation, whereas the private sector made up only 40.23% in 2017 [vi] and this means that the state is still Present in the Iraqi economy and a large percentage.
It is clear from the above indicators, which are the weak economic freedom and private ownership and the low contribution of the private sector in the gross domestic product and commodity exports and in the formation of fixed capital, that the role of the private sector in Iraq is a marginal and not real role.
Based on this conclusion, the decision-makers must be interested in working to reform the role of the state in the economy, in a way that contributes to making room for the private sector and encouraging it to take its real role in the Iraqi economy instead of the marginal role, in order to improve economic growth rates, reduce unemployment rates and achieve balance Internal and external.
* Researcher at the Al Furat Center for Development and Strategic Studies / 2004-2020
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