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Dr.. Dr. Aladdin Jaafar *: In light of the current crisis and an alternative to falling oil - manufacturing as an engine of growth and employment DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

Dr.. Dr. Aladdin Jaafar *: In light of the current crisis and an alternative to falling oil - manufacturing as an engine of growth and employment

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Dr.. Dr. Aladdin Jaafar *: In light of the current crisis and an alternative to falling oil - manufacturing as an engine of growth and employment Empty Dr.. Dr. Aladdin Jaafar *: In light of the current crisis and an alternative to falling oil - manufacturing as an engine of growth and employment

Post by claud39 on Mon May 11, 2020 9:25 am

Dr.. Dr. Aladdin Jaafar *: In light of the current crisis and an alternative to falling oil - manufacturing as an engine of growth and employment


05/10/2020



Dr.. Dr. Aladdin Jaafar *: In light of the current crisis and an alternative to falling oil - manufacturing as an engine of growth and employment Alaa-Aldeen-Jaafar-image




It is said that job opportunities do not fall from the sky and do not come through administrative decisions, the impact of which may end after a while, but rather an inevitable result of sound economic development. Also, there is no automatic or automatic relationship between growth and human development without a fair distribution of the achieved economic growth.

 

Without diving into the details of theories of economic development, everyone agreed that manufacturing is the essence of the structural transformation and the achievement of economic development in all its dimensions, and it is the main driver of production and operation.

 

The structural change that promotes growth and development can only be achieved through the manufacturing sector, as it is only capable of creating added value, improving productivity, and bringing about the required technological change, and thus even wider cultural and societal change.

 

Available studies and relevant data for a group of countries that have experienced industrial development indicated that for every job opportunity created in the manufacturing industry, two (2-3) job opportunities are created outside of them. What helps to save large groups of the population from poverty, raise the standard of living of the population, and improve results in the areas of health, education, level of urbanization, and others.

 

The desired structural change that many economies are trying to pursue is subject to some degree to the prevailing conditions of supply and demand. On the supply side, it relates to the level of wages, skills, technological progress, and the prevailing business environment. Whereas, the demand side relates to imports, commodity exports and realized investment, including foreign direct investment. All of these factors work together in harmony as engines to bring about structural change through the manufacturing sector to lead the development process.

 

High wages in a timely manner may push investors away from contributing to the implementation of investment projects, although the matter is related to other factors as well. The decline of investors will lead to a decline in the manufacturing process and a decline in employment opportunities, as well as the appropriate level of industrialization (low technology and labor intensity) as in the case of Iraq It helps a lot to generate job opportunities.

 

The consistency of government policies is very important to ensure success in adopting policies of structural change and gradual shift towards a more advanced economy capable of production and job creation through a phased shift towards industrialization. Economic policies that work to remove obstacles and correct market failures by setting appropriate customs tariffs To provide incentives and subsidies, and to allocate financial resources to industrial projects and find markets, all of that must be appropriate for every stage of the transformation, for the transition from the primary agricultural economy to industry in its early stages requires following the path of pain. Nation between agricultural and industrial policies and support work-intensive industries to be followed by improving manufacturing efficiency gradually in line with the experience gained.

 

The decline of the industrialization process in Iraq, especially after 2003, is due in large part to the adoption of inappropriate macroeconomic policies and the insistence to go a dead end, especially the adoption of a financial and monetary policy contrary to the reality of the Iraqi economy, especially in the area of ​​adopting high interest rates and exchange rates that are very exaggerated in their value This has negative effects on the economy as a whole and on the industrial sector in particular. The adoption of open trade policies and the liberalization of trade greatly affected local commodities and did not give them enough time to restructure and develop. This led to a frightening decline in industrialization to represent the industrial sector less than 2% of GDP, a stage that no economy in the world had ever reached until In the early primitive economics (i.e. a return to the pre-industrial stage) that we preached to the friendly American side two decades ago.

 

The industry, by its dynamic nature, has direct effects on all sectors and other economic fields. The increase in demand for agricultural raw materials, etc., as well as the situation with banking services, insurance, trade, transportation, skills development and learning through practice, is all crucial to stimulating economic growth and employment. The available data indicated that the industry has absorbed more than (388) million job opportunities worldwide in recent years, representing about 16% of the total workforce in the world.

 

Unemployment and job creation

 

Unemployment is one of the problems facing all economies, especially developing countries, because of its social and political repercussions. It is a clear expression of the waste that occurs in human resources, especially educated ones, on which financial allocations have been spent that are not a few of the general budgets of these countries.

 

In Iraq, this problem is not a result of today, but rather is the result of the economic conditions that Iraq witnessed during the past three decades of a clear decline in economic growth rates that led to a significant decrease in employment and employment rates and thus the emergence of real unemployment and its transformation into a structural problem to reflect the general economic imbalance between Supply and demand for labor and the dissociation of the relationship between growth and employment.

 

The economic transformations that Iraq witnessed after 2003 have contributed and are not expected to exacerbate the problem of unemployment and the difficulty of finding appropriate solutions to it, in addition to the well-known diagnosis of the Iraqi economy’s unilateralism and its dependence on the oil sector and its weak primary productive sectors that are running the workforce. The approved transformations and policies came after 2003 To complicate the relationship between growth, operation and use. These transformations are as follows:

 

1- Wide openness to foreign markets and inappropriate application of the principle of free trade.

2- The deterioration of many small and emerging industries.

3- Closing many establishments and factories in the public and private sectors.

4- Poor performance of the private sector and its inability to absorb new labor.

 

For example, the banking system was and still has significant financial liquidity represented by large deposits and high capital for private banks, but there is a large percentage of the population and projects, especially small projects, excluded from granting loans because of the high interest rates on loans and large in-kind guarantees that Demanded by those banks, which made borrowing mostly confined to some of the able categories of business owners and large properties, while excluding an important segment, especially young people and new graduates looking to establish small income-generating projects, which led to a retreat in the experience of projects Small in Iraq and lost them advantage and their ability to create many jobs, especially among the youth of the size of a small investment compared to the large state-run projects, along with other reasons that led to disrupt the role of the private sector absorb labor, especially graduates.

 

The poor performance of the private sector on the one hand and the lack of reconstruction projects contributing to real employment of the labor force on the other hand has contributed to the exacerbation of the graduate unemployment phenomenon in particular, especially if we know that the number of university graduates from various specializations has reached (152,467) students during the year (2017-2018) only, which is not a small number that needs an effective strategy capable of real employment for this size of the workforce. This is in addition to the 9,345 graduate graduates.

 

These and other transformations have produced new unemployed labor as well as many imbalances represented by the increase in the degree of imbalance in the labor market and the state of schizophrenia between the outputs of the educational system and the need of the labor market and the decline in enrollment rates and the increase in dropout rates and other negative phenomena that were associated with macroeconomic policies based on Wide public spending on specific sectors that are not occupied by the labor force (oil and electricity) due to the need for financial resources to revitalize economic life and provide services, which was done at the expense of other sectors that are running the workforce, especially (containment industry The Mechanism of Agriculture, Construction, and others) which resulted in economic growth that is not running the workforce, and this has helped to create a structural imbalance in the composition of the workforce represented by the following:

1- The high rate of underemployment growth, with a clear variation in these rates between governorates.

2- A significant increase in unemployment rates, especially among youth, to reach (13.8%) in 2017.

3- The low participation rate of women.

4- The decrease in the rates of economic activity to (42.8%) in 2017.

 

These trends in the labor market and unemployment have deepened the challenges facing the labor market in Iraq, which can be diagnosed with the following points:

 


  • Sagging public sector and its embrace of workers in excess of its real economic need and the emergence of the problem of persuasive and underemployment and more than was the case in the past.

  • The inability of the private sector to generate job opportunities, especially in light of the slowdown in privatization and restructuring of public enterprises.



C- The inconsistency between the outputs of the educational system and the needs of the labor market, and the exacerbation of the graduate unemployment phenomenon.


  • The expansion of the informal sector and the spread of the decent work phenomenon.

  • Failure to keep pace with rapid developments in the field of technology has led to a shortage of university outputs due to the expertise and technical skills required by the labor market.



 

These facts put the responsibility on development plans in order to adopt strategic visions and realistic goals based on restoring the reciprocal relationship between growth and employment to make economic growth a generator of decent work opportunities and boosting levels of productivity based on the economic relationship between wages, skills and working competencies. It has adopted national development plans in Iraq A number of the main goals that should be reached during the coming years, which are as follows:

 

The first goal: to reduce the general unemployment rate.

The second goal: working to raise the participation rates in the economic activity of both male and female sexes.

The third goal: developing the activities of labor market institutions.

Fourth goal: to invest the demographic window spatially according to the governorates.

Fifth goal: Provide a decent work environment.

 

In order to achieve these goals, the national development plans adopted a number of means to reach these goals, the most important of which are the following:

 


  • Increase the percentage of investment spending from total public spending, provided that this is accompanied by raising the efficiency of implementing investment projects, especially in the basic sectors (agricultural and manufacturing).

  • Adopting extensive training programs to develop the skills of the unemployed coupled with providing soft loans, while linking this with the reality of the labor market.

  • Legislating a social security law to enhance the role of the formal sector in generating employment opportunities while securing the appropriate environment for the transition from the informal sector to the entrepreneur.

  • Work as closely as possible to link educational systems and curricula to the needs of the labor market.

  • Activating employment offices as the main source for feeding, analyzing, and utilizing labor market information to help the unemployed find jobs in line with the capabilities and qualifications of job seekers.

  • Adopting a flexible wage policy that responds to economic and social changes.

  • Establishing decent work values ​​and conditions among the ranks of the workforce.

  • Activating the role of the national employment policy and revitalizing it in a way that contributes to spreading youth awareness in terms of not relying on the public sector for employment, especially among females.

  • Addressing the imbalance between the outputs of the educational system and the professional capabilities required in the labor market by developing curricula and providing graduates with the required skills and updating them according to the requirements of the labor market.



 

We mentioned at the beginning the importance of industry in employment and growth, and this is not only limited to the amount achieved, but also at the level of the accumulated skills and experiences that provide the basis for innovation and technological development as they lead to the creation of new jobs and a new pattern of income distribution, which leads to the expansion of the formal industrial sector and absorption of employment Coming from other sectors, especially the agricultural sector and the services sector (informal) and informal employment and their integration with formal formal employment, which provides the basis for expanding tax revenue and improving economic institutions and social protection measures In addition, this matter opens the door for wide participation of women in the economic process and joining the labor market, which is a key factor in bringing about appropriate demographic shifts.

 

In this direction, human capital is an essential driver of economic growth and there is no better place than manufacturing to craft skills not only technical skills but also social knowledge and behaviors. Hence the importance of supporting policies aimed at strengthening vocational training in all sectors, whether public or private, formal and informal, which facilitates the process of transfer of skilled and trained workers between all sectors. In Iraq, the lack of funding for vocational and technical training with the closure of a number of laboratories in the public and private sector remains the main bottlenecks that the Iraqi economy suffers from.

 

We believe that any future economic strategy in Iraq must have two complementary axes. First , it is geared towards tackling economic crises and structural reform of the Iraqi economy. And the second axis ,It tends towards achieving an economic growth rate capable of stimulating the level of employment and providing job opportunities alongside favoring the poor classes and improving the standard of living for the general population, represented by raising the per capita income rate, given that economic growth and improving the individual’s standard of living are the core of national development plans, which requires that it be The social dimension is present with any targeted economic growth in the upcoming plans. In light of the current conditions that the Iraqi economy is going through, where many economic and non-economic changes are crowded out, the demand for economic diversification and the effect of changing the structure of the Iraqi economy has become a matter of course, in addition to responding to the requirements of social security and finding a balance between the role of the state and the role of the private sector in economic activity, including It guarantees the supremacy of the principle of (social market economy) and launching the investment process to the maximum extent possible to achieve the required economic growth rate, which is the focus of the development plan 2018-2022.

 


  • Enhancing the effectiveness of investment (public and private) that is still modest in Iraq and raising its rate to the gross domestic product.

  • Providing a strong boost to productive economic activities, especially in the sectors (manufacturing, agriculture, tourism, information technology) that we believe have a fundamental role in driving economic growth and employment forward.

  • Promote investment in human capital and give it the required priority.

  • Working to achieve an economic growth rate in line with the capabilities and needs of the Iraqi economy.

  • Work to increase the average real per capita income at rates that exceed the rates of population growth.

  • Raising the employment rate, providing appropriate job opportunities, and working to reduce the unemployment rate.

  • Working to achieve effective economic integration with the regional and international environment and the search for new economic relations that enhance Iraq’s comparative advantages.

  • Restructuring the national industry and raising the percentage of its contribution to the gross domestic product.

  • Maintaining the priority of the agricultural sector and considering providing food security as a strategic requirement for development plans in Iraq.



 

(*) General Director of the Economic and Financial Policy Department, Ministry of Planning

 

May 10, 2020

 

Copyright reserved for the Iraqi Economist Network. Republishing is permitted provided the source is indicated.

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