Iraq’s Kurdish region has for decades lived off its oil wealth, but plummeting energy prices amid the COVID-19 pandemic and financial mismanagement are forcing locals to return to long abandoned farms.
Civil servants from the northern region’s bloated public sector have gone without pay and many are turning back to agriculture and other businesses to make ends meet.
On a rugged hillside about 50km east of Erbil, the booming regional capital, vineyards are ripe for harvesting as a new source of income.
Photo: AFP
Abdallah Hassan, 51, a civil servant from the nearby village of Meer Rostam, has returned to harvest the grapes, used to produce raisins and vine leaves, for the first time in almost 20 years.
“There is hardly any work left for us and there are no salaries,” he said, complaining that the regional government now “only pays wages every couple of months.”
“It’s better for farmers to tend to their fields than wait for the payday or for charity,” he said.
Hassan recounted how before the 2003 US invasion that toppled former Iraqi president Saddam Hussein’s regime, the Kurdish region had survived on farming during years of painful sanctions.
Since then, in its drive to secure lucrative oil revenues, the autonomous Kurdistan Regional Government had mostly abandoned agriculture.
Big investments from multinational energy companies have transformed the region, and Erbil has become an urban hub with skyscrapers and luxury hotels.
However, this year, the pandemic and tumbling oil prices have taken a heavy toll, worsened by budget disputes with the central government in Baghdad.
The Iraqi economy, one of the world’s most oil-dependent according to the World Bank, saw its gross domestic product contract by about 10 percent this year.
Putting all of the regional economy’s eggs into the energy basket had proven costly, Kurdistan Board of Investment chairman Mohammed Shukri said.
“We’re rich when the oil price is high, and we’re poor when the oil price is low,” he said. “I wouldn’t call this a healthy economy.”
Kurdish economist Bilal Saeed also said that the region’s leaders had made a strategic blunder by letting other sectors fall by the wayside.
“Instead of using that revenue to develop the agriculture, health and tourism sectors, the government of Kurdistan has focused mostly on developing its oil sector and ignored the rest,” he said.
Over-reliance on energy has also had a corrosive effect on Iraq’s state apparatus and fueled corruption.
A World Bank report this year pointed to Iraq’s “failure to equitably share the benefits of oil wealth” and described a murky patronage system.
“First, the dominant parties use government payrolls to reward political loyalty,” it said. “Second, they use government contracts to enrich business people close to their leaderships. Third, money is simply stolen from the ministerial budgets for both personal gain and party use.”
It is a similar story in the Kurdish region, where lucrative state posts have long been handed out by the two main ruling parties, the Patriotic Union of Kurdistan and the Kurdistan Democratic Party.
This has created a bloated public sector with more than 1.2 million staff, about 40 percent of them in the military and security sectors, out of a regional population of 5 million.
With its budget now bled dry and the Kurdistan Regional Government facing about US$28 billion in debt, it decided in June to slash civil servants’ salaries by 21 percent.
However, despite this, it has been unable to pay all of their wages on time, with the outstanding pay, accumulated over years, estimated at US$9 billion.
Shukri said that despite these woes, his investment board had granted 60 investment licenses worth US$1.5 billion, mostly in agriculture and manufacturing.
Yet how many projects are likely to go ahead is uncertain at a time of growing impatience among local entrepreneurs.
Iraqi businesses face tough competition from imports from Iran and Turkey, whose currencies have been devalued while the Iraqi dinar remains indexed to the US dollar.
Baarz Rassul, whose company Hend Steel produces 50,000 tonnes of cast steel per month, pleaded for “higher customs duties and better border controls.”
He said that when he tried to diversify into agriculture, he found it difficult to compete with cheap imports and has since dismantled his greenhouses.
Erbil and Baghdad must work out a sustainable economic plan that serves both sides, Saaed said.
However, that might be a tall order in the short term as Baghdad grapples with a massive deficit and has given no clear time line of when it plans to approve a new budget.
CAUTIOUS RECOVERY: While the manufacturing sector returned to growth amid the US-China trade truce, firms remain wary as uncertainty clouds the outlook, the CIER said The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction. “Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference. The full impact of US tariff decisions is unlikely to become clear until later this month
Popular vape brands such as Geek Bar might get more expensive in the US — if you can find them at all. Shipments of vapes from China to the US ground to a near halt last month from a year ago, official data showed, hit by US President Donald Trump’s tariffs and a crackdown on unauthorized e-cigarettes in the world’s biggest market for smoking alternatives. That includes Geek Bar, a brand of flavored vapes that is not authorized to sell in the US, but which had been widely available due to porous import controls. One retailer, who asked not to be named, because
CHIP DUTIES: TSMC said it voiced its concerns to Washington about tariffs, telling the US commerce department that it wants ‘fair treatment’ to protect its competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reiterated robust business prospects for this year as strong artificial intelligence (AI) chip demand from Nvidia Corp and other customers would absorb the impacts of US tariffs. “The impact of tariffs would be indirect, as the custom tax is the importers’ responsibility, not the exporters,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) said at the chipmaker’s annual shareholders’ meeting in Hsinchu City. TSMC’s business could be affected if people become reluctant to buy electronics due to inflated prices, Wei said. In addition, the chipmaker has voiced its concern to the US Department of Commerce
STILL LOADED: Last year’s richest person, Quanta Computer Inc chairman Barry Lam, dropped to second place despite an 8 percent increase in his wealth to US$12.6 billion Staff writer, with CNA Daniel Tsai (蔡明忠) and Richard Tsai (蔡明興), the brothers who run Fubon Group (富邦集團), topped the Forbes list of Taiwan’s 50 richest people this year, released on Wednesday in New York. The magazine said that a stronger New Taiwan dollar pushed the combined wealth of Taiwan’s 50 richest people up 13 percent, from US$174 billion to US$197 billion, with 36 of the people on the list seeing their wealth increase. That came as Taiwan’s economy grew 4.6 percent last year, its fastest pace in three years, driven by the strong performance of the semiconductor industry, the magazine said. The Tsai
RSS