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
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