Iraq Improves On World Bank Ranking Of Doing Business

 

For the last several years the World Bank has released its Doing Business report on laws rules, and taxes that regulate business around the globe. Iraq has done poorly on these reports since it has yet to shake off the yoke of years of socialist state-run economic planning from the Saddam years. As the United States Agency for International Development pointed out, Baghdad gives lip service to loosening the role of the government over the economy, while doing little in practice. Despite that Iraq did slightly better in 2013 than 2012 according to the World Bank due to some less cumbersome rules for operating an enterprise.

In December 2013 the World Bank’s “Doing Business 2014, Understanding Regulations for Small and Medium-Size Enterprises” came out. The latest issue included 189 countries, up from 183 in 2012. Each nation is ranked according to eleven areas that affect establishing and running a business. These include regulations, legal protections on property, and taxes. This year Iraq ranked 151. That was an improvement from previous reports when it was 176 in 2012, 164 in 2011, 166 in 201, and 153 in 2009. That was due to the shortening of the time it took to complete key practices from the previous year. For example, Iraq went from 176 to 169 in starting a business because there was one less procedure to follow to complete that task. That led to a dramatic decrease in the time necessary to get through the regulations from 77 days in 2012 to just 29 in 2013. The number of procedures to get construction permits also went from 13 to 10 resulting in a drop from 187 to 139 days to get complete them. For the other categories however Iraq did the same. Its rank for getting electricity improved from 46 to 39, but the procedures, 5, and time, 47 days, did not change. Similarly registering property still took 5 procedures and 51 days. More troubling was the lack of credit and legal system for business. Its credit rank decreased from 174 in 2012 to 180, while its score on legal rights stayed at 3 out of 10. That’s largely because Iraq’s banks barely offer loans, and largely operate to finance and manage the government’s accounts. Finally Iraq scored poorly on protecting investors, trade, enforcing contracts, and resolving insolvency. For example, it took over 80 days to import or export goods, 520 days to enforce a contract, and there were no procedures for insolvent businesses. Like many developing countries Iraq largely relied upon the state to lead its development. That increased under the Baathist regime, which had a socialist ideology. Baghdad now says that it is diversifying its economy, and developing the private sector, but that’s mostly in words with little action being taken. Many of the country’s politicians do not understand economics either, and think short-term about their own political benefit, which undermines proper planning and legislation. These are the major impediments to the improvement of Iraq’s business environment. That was the reason why Iraq was only one of seven countries in 2013 that did not carry out any reforms in the areas that the World Bank monitors.

Iraq’s 2013 Rankings On World Bank Doing Business Report

Overall Rank 151

Starting a business rank 169

Number of procedures 10

Time to complete 29 days

Dealing with construction permits

Number of procedures 10

Time to complete 138 days

Getting electricity rank 39

Procedures 5

Time to complete 47 days

Registration of property rank 108

Procedures 5

Time to complete 51 days

Getting credit rank 180

Strength of legal rights index 3 out of 10

Depth of credit information 0 out of 10

Public registry coverage 0

Private bureau coverage 0

Protecting investors rank 128

Extent of disclosure index 4 out of 10

Extent of director liability index 5 out of 10

Ease of shareholder suits index 4 out of 10

Strength of investor protection index 4.3 out of 10

Paying taxes rank 63

Payments 13 per year

Time to complete 312 hours per year

Trading across borders rank 179

Documents to export 10

Time to export 80 days

Cost to export per container $3,550

Documents to import 10

Time to import 82

Cost to import per container $3,650

Enforcing contracts rank 142

Procedures 51

Time to complete 520 days

Resolving insolvency rank 189

Time to complete No practice

Cost No practice

Recovery rate 0

Iraq looks to be slowly improving its business regulations, but the pace is not as fast as it could be. The country needs massive rebuilding and has huge untapped potential. The lack of business knowledge, and the fact that almost all of Iraq’s elite grew up in state-run economies is hampering the process of reform that would speed up development. Still some progress is being made as the World Bank report showed. Only through cutting back on the massive red tape can the country hope to begin to emerge from the years of wars and sanctions that have set it back so much.

SOURCES

Al-Shaher, Omar, “Questions About Practices Of Private Iraqi Banks,” Al-Monitor, 1/17/13

Tijara Provincial Economic Growth Program, “Assessment of Current and Anticipated Economic Priority In Iraq,” United States Agency for International Development, 10/4/12

World Bank, “Doing Business 2014, Understanding Regulations for Small and Medium-Size Enterprises,” December 2013