Thursday, November 18, 2010

World Bank Report: Iraq Still Has A Bad Business Environment

Iraq is desperate to rebuild after years of wars and sanctions. It is trying to attract foreign investors and sign contracts to boost its oil, gas, and electricity industries, as well as expand its infrastructure. Unfortunately the country has a very difficult business environment, and despite promises of reforms it is towards the bottom of the World Bank’s ranking of countries.

In the World Bank’s “Doing Business 2011” report, Iraq was ranked 166 out of 183 countries. The World Bank found that hiring and firing workers was rather easy, and their pay relatively low at an average of $115.50 per month for a 19 year old. The problems came with starting and ending a firm in the country, and trading goods across borders. Iraq was ranked 174 out of 183 in ease of starting a business. There are 11 procedures companies have to go through that on average take 77 days to complete. There are 14 steps to get a construction permit, that take 215 days to finish. Registering a business on the other hand, was about average in the world, ranked at 96 out of 183, with only five procedures, taking 51 days. Getting credit was difficult, with a rank of 168 out of 183. Legal rights, protecting investments, and enforcing contracts were weak, while taxes were minimal. When it came to ease of closing a business Iraq was the worst in the world at 183 out of 183. Importing and exporting were also difficult and costly. Ease of exporting was ranked 179 out of 183 with ten documents taking 80 days, and a cost of $3,550 per container. Papers for importing took an average of 83 days and bringing in a container costs $3,650. Iraq ended up with the worst mark of any nation in the region.

Iraq’s 2011 score was actually worse than its 2010 one. That year Iraq was ranked 153 out of 183 overall. The difficulties of investment, starting and closing businesses, trading, etc. were all still there. Dealing with construction permits, getting credit, paying taxes, and enforcing contracts all worsened from 2010 to 2010, while registering property and exporting improved. 

Even though Iraq moved down the World Bank’s list this year, its scores weren’t much changed from the previous one. While five indicators got lower rankings in 2010 compared to 2011, the differences weren’t much. It would appear then that Iraq’s business environment hasn’t gotten markedly worst, but that other countries below it moved up the list, pushing Baghdad farther down. That still doesn’t change the fact that Iraq’s economy is full of problems. It still has a state-run, centralized economy from the Saddam days. Rules and regulations are difficult to understand and contradictory, investment laws limit foreign control and incentives, and the bureaucracy is slow and paper based. All of these contribute to Iraq’s low scores on the World Bank’s report, and have kept many foreign businesses away from most industries except for energy and construction. All of these procedures need to be reformed if Iraq ever hopes to bring in the foreign capital and known how it desperately needs to rebuild itself.

World Bank Rankings Of Iraq
2009 150 out of 183
2010 153 out of 183
2011 166 out of 183


Economist, “No promised land at the end of all this,” 3/4/10

World Bank Group, “Doing Business 2010 Iraq,” 2009

World Bank and International Finance Corporation, “Doing Business 2011 Making a Difference for Entrepreneurs,” World Bank, 11/4/10

No comments: