political progression, economic stagnation and the strategic opportunity
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Political Progression, Economic Stagnationand the Strategic Opportunity
Mohammed A. Field Al- Khafaji
Iraqi Institute for Economic Reformwww.iier.org
PRESENTED AT 6TH ECONOMIC FREEDOM IN THE ARAB WORLD
Beirut 20 – 21 October 2011
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The indicators of Political progression and economic stagnation
Challenges facing the Iraqi economy
Importance of Rule of Law & Good governance Democracy and Economic prosperity
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Content
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Iraq made significant political achievements in comparison to other Arab countries, and this has manifested in for example:
Referendum on Federal Constitution, Elections at National and sub-National Levels
Has Iraq Achieved political progress?
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Has Iraq made political progress?
Source: Freedom in the World 2010: Table of Independent Countrieshttp://www.freedomhouse.org/template.cfm?page=505
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Decrease in unemployment from 51% to 15%,
Decrease in poverty from 54% to 27%,
Increase in electricity production from 3500 to 7500 MW,
Increase in GDP per capita from $3000 to $ 4000.
Decrease in inflation rate from 65% to 6%,
Increase in access to safe drinking Water from 30% to 70 %,
Significant Economic Progress?
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A significant proportion of citizens lack access to basic services.
Lately the grievance of citizens have escalated to protests calling for basic services.
Economic Stagnation
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Family Satisfaction: survey of Public Services in 2006
Health: 30% on average Crosse the board not satisfied with heath service
Education: 40% on average cross the board not satisfied with education service
Other Services: 60% on average not satisfied with other services (e.g. Electricity, water, housing)
Percentage of unsatisfied Families with public services
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What is the relationship between Democracy and Economic prosperity ?
There is no direct relationship, but evidence internationally, linking economic prosperity to an environment where there is respect for the rule of Law.
Yes, Democracy does provide better environment for economic growth providing there is respect for the Rule of Law
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Economic & Social Challenges
What are the facts of the Iraqi Economy?Damaged SMEs, and ineffective Public and Private sectors
Poor business environment for economic and investment
Poor social structure and ineffective educational system
The absence of good management of the economy
Lack of respect for the Rule of Law and Good Governance
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Obsolete System and Regulation
Advertising Receiving contracts
Issuing the offer
Process of Procurement at Basrah Province (as example).
Complicated Government routine, Non-clarity of roles and responsibilities and Overlapping of jurisdictions.
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Absence of Rule of Law & Good Governance
Participations Rule of law Transparency Responsiveness Consensus orientation Effectiveness and efficiency Accountability Strategic vision Equity
It is very hard to find any of these elements in place
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Weak Enviroment for Investment
Despite good investment legislation and incentives to do business, there a number of obstacles:
Government Bureaucracy, lack of commitment and management skills;
The absence of Insurance Companies, responsive Commercial Banking;
Corruption
.
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Total Revenue in 2011 is $ 69,175 Billion
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Total Expenditure
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Revenue, Expenditure & Deficit for 2011 ($Bn )
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Federal Budget 2006- 2009.
Total Government Revenue $210 BillionsAllocated spending $211 BillionsActual spend $182 billions
Notes: Investment Budget execution rate is 58%Operational budget execution rate is 91%
Is the Federal Budget really in deficits?
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Financial Execution Ratio of Capital Expenditure for 2010
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The Relationship between Economic Development & Rule of Law
Kaufmann, D. and A. Kray (2002), ‘Growth Without Governance’, World Bank Policy Research Working Paper No. 2928, November.
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The Relationship between Economic Development & Rule of Law
There are international evidences to suggest: Creates confidence between the citizens and the state/ organization Encourages transparency and reduces waste of resources Provide an incentive to financial institutions to lend, and Encourages investors to provide liquidity and technology transfer
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Culture/Religion:Values
Civil Society:Voice for the
People
State:Formal
rule
Strong Economy
With positive
spill over
Code of conduct
Rule of Law & Good Governance
Better Environ
ment for Business
Accountability
Education
What is needed?
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Democracy without Rule of Lawis a bird with one wing