The Iraq Britain Business Council (IBBC) has published its Advisory Council report on the Ease of Doing Business in Iraq. The report outlines the challenges businesses face and provides actionable recommendations for the Iraqi government to foster a more business-friendly environment. The full report is now available on the IBBC website here.

According to data from the World Bank, Iraq continues to face significant challenges in becoming competitive for businesses across various indices—particularly in the provision of public services, ease of starting a business, navigating regulations, and securing credit.

Key Challenges Identified by Professor Gunter

Professor Frank Gunter highlights several critical drivers for change:

1. Rapid Population Growth: Iraq’s population is expanding by approximately 1 million people annually. To prevent unemployment rates from worsening, the government must create 350,000 new jobs every year.
2. Declining Oil Revenues: With oil accounting for 96% of government income, falling oil prices (forecasted at $70 per barrel) threaten economic stability. Diversifying income sources through taxation, sales tax, or industrial production is essential to bridging the fiscal gap and generating jobs.
3. Education Misalignment: Iraq’s education system is predominantly geared toward preparing students for public sector roles. A shift is needed to equip students for private-sector opportunities, particularly in energy and other growing industries.
4. Public-Private Partnerships (PPPs): PPP frameworks are currently failing due to frequent government renegotiations, which render long-term private investments unsustainable.
5. Exchange Rate Challenges: The recent 11% appreciation of the Iraqi dinar against the dollar has made imports cheaper but hurt the competitiveness of local producers and exporters.
6. Corruption: Despite progress being made by the Sudani Government corruption remains at all levels of society remains the main inhibitor to business.

The Role of the Private Sector

Expanding the private sector is seen as the only viable option to create jobs, spur innovation, and diversify income sources. However, systemic issues such as corruption and bureaucracy remain significant barriers. For example, setting up a business in Iraq takes an average of 160 days, and corruption is estimated to cost companies 20% of their turnover.

Proposed Solutions

To stimulate private sector growth, Professor Gunter recommends the following:

1. Combat Corruption and Reduce Bureaucracy: Accelerate anti-corruption measures and simplify regulatory processes to encourage investment.
2. Enhance Business Regulation: Introduce simpler, more transparent regulations to foster entrepreneurship.
3. Improve Access to Banking and Finance: Expand banking services to provide businesses with easier access to credit.
4. Reduce Public Sector Employment: Transition the workforce towards private-sector roles by scaling down state-owned enterprises.
5. Streamline Insolvency Processes: Create a fair and efficient system to resolve business insolvencies.
6. Reform Education: Broaden and deepen educational curricula to produce graduates ready for private-sector industries, such as engineering and business.
7. Adjust the Exchange Rate: Adopt a sustainable exchange rate that balances import competitiveness with local producer profitability.
8. Facilitate International Trade: Implement policies that enable smoother trade relations and reduce barriers for exporters.

The Stakes Are High

Professor Gunter underscores the urgency of these reforms:

“Improvement in these areas will require both focus and the expenditure of political capital. But the cost of failure will be high. Continued dependency on oil-export-funded government employment will become steadily more difficult over the next decade, resulting in higher unemployment and underemployment, particularly among young men. This outcome is not only economically inefficient but also socially and politically destabilizing.”

Learn More

The report, complete with detailed analysis and recommendations, is now available for download on the IBBC website here.

Professor Gunter will discuss the findings further at a roundtable during the IBBC Dubai Conference, taking place on 12th and 13th December. To learn more or register for the conference, visit the IBBC website here.