Revitalizing Iraq's private sector: challenges, initiatives, and economic resilience

Shafaq News/ Iraq's private sector is in dire straits, with over 37,000 factories lying dormant—a stark reminder of the sector's decline since 2003.

As noted by observers, the absence of government initiatives to bolster this vital sector has led to its systematic destruction, alongside other key industries.

Prime Minister Mohammad Shia al-Sudani has shown a renewed focus on revitalizing the private sector, with efforts to revive thousands of factories in recent years. Despite progress, challenges persist, with many factories still awaiting revival.

Deterioration and sanctions

Economic expert Omar al-Halbousi told Shafaq News Agency that the Iraqi private sector is in a state of severe decline, as the government has failed to devise plans to boost it. He noted that "the private sector's role in the national economy is minimal and shrinking due to various factors."

One of these factors, according to al-Halbousi, is the political interference in the private sector, which has led to the domination of some fields by a certain class of politicians who "have used the private sector to enrich themselves and launder money through their own institutions."

Another factor is the US sanctions that have hit the Iraqi private sector hard, as they have limited access to funding from private and public banks, and favored some parties over others in receiving government support.

Al-Halbousi also blamed the foreign interventions that "have aimed to destroy the Iraqi sectors, to keep Iraq as a market for their goods, without respecting the sovereignty and the national will of the Iraqis to develop their economy."

As a result of these factors, al-Halbousi pointed out, "The private sector has not been able to provide enough job opportunities for the Iraqi youth, and the wages have been low and unfair, despite the long working hours and the heavy burdens on the workers." adding that many "workers have been laid off without any justification."

Al-Halbousi also highlighted that the US sanctions on the banking sector have worsened the situation, as they have reduced the chances of finding jobs and increased the poverty rates.

Moreover, the expert said, "The private sector has suffered from the neglect of the large number of workers who have been left out of the economic cycle, and the low contribution to the domestic product, with the lack of innovation and creativity."

"The private sector is supposed to be the engine of economic growth, as it is more flexible and responsive to changes, but the governments since 2003 have contributed to its destruction, along with the rest of the sectors that have been systematically ruined."

The suffering of the Iraqi worker

Addressing the deterioration of Iraqi workers' circumstances necessitates coordinated efforts and intensified initiatives to implement tangible and effective plans.

On December 3, 2023, Iraqi Prime Minister Mohammad Shia al-Sudani announced enforcing the retirement and social security law for private sector workers. This development followed the Iraqi parliament's approval of the law in May 2023, marking a crucial step in the government's pledged economic reforms aimed at safeguarding the rights of workers in this sector.

Rahim al-Ghanimi, the deputy head of the Federation of Trade Unions in Iraq, highlighted key aspects related to workers' conditions, stating that the minimum wage stands at 450,000 dinars per month, with an 8-hour workday scheduled for six days a week.

Al-Ghanimi emphasized that "legislation pertinent to the working class has encountered delays, resulting in Iraqi workers not receiving rights comparable to their counterparts in the Arab world, despite their diverse skill sets."

Al-Ghanimi pointed to the stagnation of numerous factories, companies, and industries, including the spinning and weaving factory in al-Kut and Babil, mixed and industrial sectors, and light industries."

"The absence of local production has led to a reliance on imports, with only restaurants and hotels currently operational."

Furthermore, Al-Ghanimi pointed out that "the influx of foreign labor facilitated by employment agencies has contributed to the displacement of Iraqi workers. Many of these foreign workers lack the technical expertise and experience of their Iraqi counterparts, posing a challenge to the local workforce."

Foreign labor

Sattar Dunbos, the head of the General Federation of Trade Unions in Iraq, told Shafaq News Agency, "The foreign labor file was chaotic." He estimated that "more than one million workers entered the country without any conditions, restrictions or supervision from the Ministry of Labor and Social Affairs. This increased the unemployment rate in Iraq."

On the other hand, Ali Al-Tamimi, a legal expert, said, "Iraq did not have a specific law for foreign labor. The laws that applied were the Labor Law 37 of 2015 and the Residence of Foreigners Law 118 of 1978. These laws required foreign workers to have a work permit, passport, entry visa, and other security conditions. Violators could face a fine of up to 500 dollars and deportation by the investigation court."

He also told Shafaq News, "The unplanned presence of these workers, who numbered around one million, was like the influx of imported cars. It affected the economy, criminal security, unemployment, and money outflow." urging enacting a special law that would regulate their presence and deportation.

"Many of them worked without residence, and the only judicial solution was to send them back to their countries."

Investment obstacles

Hussein Al-Saibari, a member of the Parliamentary Committee of Economy and Investment, voiced concerns to Shafaq News Agency, stating that "various ministries, departments, and state institutions in Iraq have impeded investment opportunities in the country."

He specifically noted the challenges in obtaining approvals from the Ministry of Industry for establishing industrial factories.

Al-Saibari underscored the importance of government support for projects and investments that generate employment opportunities and keep financial resources circulating within Iraq rather than overseas.

Soran Omar, another Parliamentary Committee of Economy and Investment member, emphasized "the necessity for fostering growth in the Iraqi industrial sector, this could be achieved by providing adequate budgetary allocations to the Ministry of Industry, streamlining investment processes in the industry, and ensuring access to essential resources like fuel, electricity, and land for factories."

Omar also advocated for enacting a law governing partnerships between the public and private sectors to safeguard the interests of both parties involved. He urged "the government to prioritize economic security and enforce regulations protecting locally produced goods." Additionally, he called for stringent measures to regulate border crossings and combat smuggling activities that undermine Iraq's industrial and agricultural sectors.

Pointing out the historical roles of key government officials, Omar noted that "the former prime minister served as the Minister of Industry until 2018, while the current Minister of Industry held the position of Minister of Planning in the previous administration." He expressed optimism regarding the anticipated growth of the Iraqi industry under these circumstances.

Adel Akab, the head of the Federation of Iraqi Industries, stressed "the urgent need for establishing factories across various industrial sectors such as pharmaceuticals, food, construction, textiles, and electrical equipment, alongside services and production facilities."

Akab emphasized the significance of sectors like medicine and food while highlighting the demand for over 4 million housing units necessitating diverse construction materials. He stressed "the interconnectedness of different sectors, asserting that neglecting one could adversely affect the others, given their collective importance to the nation."

Akab pointed out Iraq's robust purchasing power and the populace's inclination towards domestically produced goods that align with their preferences. He commended the government's commitment to revitalizing the industry and implementing previously stalled decisions to stimulate economic growth and industrial development.

Government interest

In this context, Aqeel Raouf Ahmed, the head of the advisors at the Federation of Industries, affirmed that "the prime minister places significant reliance on the private sector to facilitate the construction of one million housing units, with a clear emphasis on prioritizing Iraqi products for outfitting these units."

Regarding the status of existing factories and efforts to revive dormant ones, Ahmed elaborated to Shafaq News that "there are approximately 67,000 registered factories, and over the past two years, including those previously operational, 30,000 factories have been brought back into production. However, there are still 37,000 factories that remain inactive."

He further stated, "There is a concerted effort to reactivate all these factories. During a recent meeting with Al-Sudani, requests were made to exempt raw materials from taxes to facilitate factory resumption, reduce electricity and fuel costs, protect locally manufactured goods, provide land ownership for industrialists, and waive accumulated taxes. Remarkably, all these requests were swiftly implemented within two days."

Highlighting the proactive stance taken, Ahmed mentioned that "decisions have been made and are now awaiting execution. The prime minister has expressed unwavering commitment to ensuring their implementation. Restarting the dormant factories will not only reactivate them but also catalyze the revival of other factories, as they are interdependent and mutually supportive. This, in turn, will result in increased employment opportunities and reduced unemployment rates."

Unemployment and the labor market

On the other hand, Abdul Zahra Al-Hindawi, the spokesperson for the Federal Ministry of Planning, highlighted that "the unemployment rate in 2021 soared to 16.5%, a significant increase compared to previous years, primarily attributed to the adverse impacts of the COVID-19 pandemic, resulting in the halt of economic activities and developmental initiatives."

Speaking to Shafaq News agency, Al-Hindawi expressed optimism regarding a decline in unemployment figures, citing the measures implemented over the past two years, 2022 and 2023. These measures encompassed numerous job appointments, the resumption of various projects, and the initiation of new ventures, collectively generating thousands of employment opportunities for the youth. He concluded his remarks by stating, "A current survey is underway to ascertain the updated unemployment rates."