Thursday, November 17, 2011

Iraq Receives Poor Rating By World Bank On Doing Business


For the past several years, the World Bank has been issuing an annual report on the business environment around the world, called “Doing Business.” The latest issue has just been released. In it, Iraq barely moved up the list, mostly because other countries moved down. Overall, Iraq continues to be one of the most difficult places in the world to do business.

Out of 183 countries included in the World Bank report, Iraq was ranked number 164 in ease of doing business. Last year, it was 166, and the year before that 153. Iraq was at the bottom of the Middle East and North Africa in the 2011 findings. In comparison, Saudi Arabia was number 12, the United Arab Emirates number 33, Israel 34, Qatar 36, Tunisia 46, Oman 49, Kuwait 67, Morocco 94, Jordan 96, Yemen 99, Lebanon 104, Egypt 110, Palestine 131, Syria 134, Iran 144, and Algeria 148. That led to a regional average score of 93. Iraq was far below that, and not even close to Iran and Algeria who were also at the bottom of Arab and Persian countries.

Iraq received its score based upon ten criteria. From highest to lowest ranking, Iraq was 46 out of 183 in getting electricity, 49 out of 183 in paying taxes, 98 for registering property, 120 for dealing with construction permits, 122 for protecting investors, 140 for enforcing contracts, 174 for getting credit, 175 for starting a business, 180 for trading across borders, and 183 out of 183 for resolving insolvency. That placed Iraq’s basic government services and regulations right near the bottom in almost all categories. That situation has not changed for the last six years that the World Bank has been conducting its survey.

The reasons for the low scores were the elaborate regulations, and long delays that the government has in place for businesses. To start a company for example, an entrepreneur has to go through eleven procedures that take an average of 77 days. It takes 13 procedures and 187 days to get a construction permit. To import or export products it requires ten procedures, an average of 80-83 days, at a cost of $3,550 per container to bring it in, and $3,650 to ship it out. Even to get electricity, which received the best ranking by the World Bank, takes five steps, lasting an average of 47 days. Just going through one category shows how difficult it is to work in the country. To open a business, people have to look for a company name, and obtain a name reservation letter from the Baghdad Chamber of Commerce, which takes two days. They then have to hire a lawyer to draft an article of association taking one day, deposit money in a bank and obtain a confirmation receipt that takes two days. Then register at the Commercial Registry, taking 14 days, followed by placing an incorporation notice in the newspapers, which lasts three days. They then have to spend two days making a company seal, obtain a registration certificate in one day, register with the tax authority, taking two days, legalize their accounting books, which lasts two days, register employees for social security, which takes three days, and apply for a trade license, which lasts 30-60 days. All together, those steps cost between $2,752-$4,379. In the last year, that process has also become more expensive. Given all that, it’s no wonder that Iraq has received such a poor score for the last several years. This is typical of too many things in Iraq, which still suffers under a state run economy, with a huge and inefficient bureaucracy.

Baghdad has done very little to solve any of these problems, because it is an oil dependent country. With the vast majority of its wealth derived from petroleum, there has been very little incentive to reform the economy. The private sector in the country is relatively small, and some sectors like farming and manufacturing, have actually regressed in recent years. The government has not been impacted by this, because it is so reliant upon oil, and placed much of its future on developing that industry. Until Baghdad changes its priorities this situation is likely to continue, and Iraq will remain towards the bottom of the World Bank’s survey.

SOURCES

World Bank Group, “Doing Business 2010 Iraq,” 2009
- “Economy Profile: Iraq; Doing Business: November 2011

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