Saturday, 9 January 2016

How to Keep Kurdistan Safe (2)

Jamal Fuad, Ph.D,
Retiree, FAO and the World Bank, International Consultant

Last year, on 15 January,2015, I published an article in the English edition of the Rudaw, under the same title as this, “How to Keep Kurdistan Safe”, which was read by over 5,000 people[1].The main point I had emphasized then was that we must not depend solely on oil for our budgetary needs, and therefore we must find other financial venues to supplement the oil revenue. As oil prices have been on the decline, it is essential that we think again and try to develop other sources of income to bolster our budget.

Firstly, we must cut down on the imports of items we can do without. We also need to raise tariffs on imports of items that we can produce locally. The current unhindered importation of just about everything has weakened our financial status and has drained the national budget which has become unsustainable.

Our finances have also been very much burdened by an unexpected war on our doorstep, decreased oil revenues, and the lack of other enterprises by which we can supplement our budgetary needs. I find it appropriate to expand on the ideas I had introduced earlier and then point out some luxuries that we could do without.

It is unfortunate that after 10 years of our self-rule the supply of electricity remains insufficient. Water, health services, and education facilities are still inadequate, in spite of a fair supply of funds from the oil sector of over $100 billion over the past 10 years. The problem has escalated to a degree that KRG (The Kurdish Regional Government) has not even been able to pay regular government salaries to its civil service staff. We have never faced this last situation at any other time in the history of the KRG, including the difficult years when the Region was under sanctions from Baghdad in the 1990’s.

Civil servants depend solely on their monthly salaries to pay for their daily cost of living. The merchants likewise eagerly await the end of the month to accommodate the needs of the civil servants. Therefore, non- payment of salaries, not only paralyses the civil servants but also jeopardizes the whole market environment.
The Kurdish Regional Government (KRG) has also been unable to pay the hundreds of contractors who were engaged to work on public projects. Many of
these have now been declared bankrupt and ceased working, resulting in large numbers of unfinished rehabilitation projects and a further increase in the rate of unemployment. In addition, as a result of unwise financing, excessive cash flow out of the country, in addition to corruption and excessive money laundering our banks have been left without sufficient monies. Such banks have not been able to honor checks from their customers or even repay them the money owed to them.

We may ask just where have we gone wrong, and why have we failed in providing our citizens with the amenities they deserve?

Such queries are common among our people, and I do not wish to repeat them here. However, I will try to take a positive stand and direct my efforts to finding solutions rather than dwelling on the mistakes of the past. I shall try to point out specific excesses that can be altogether eliminated. I am confident that, with some courage and determination, KRG can find ways of getting out of the current budgetary crunch. So let us first discuss where can we save money, and then what can we do to find sources of funds whereby the budget can be supplemented.

1.      A sizeable amount of funds can be saved through the substitution of foreign imports of food items with those produced locally, or alternatively imposing required  tariffs to eliminate competition. We have the land, the water, and the climate to grow just about every food item we are importing. We can also raise sufficient poultry and livestock that we require. What we really need is a sound agricultural policy that sends farmers back to their lands[2]. Special incentives, such as the provision of improved seeds, tools and farm equipment, fertilizers and biological control chemicals plus improving marketing facilities will give farmers the confidence they need return to their farms. Implementation of a sound agricultural policy,  restriction of imports, and provision of technical and financial support, will facilitate the rejuvenation of our agricultural sector and produce the agricultural products we need.

2.      Support of a farmers' union is essential to strengthen their bargaining power in the purchases of agricultural inputs and finding marketing opportunities for their products.

3.      With the revival of the agricultural sector, agro-industries must be supported to produce the cooking oil we need, the pasta, the tomato paste, fruit juices in addition to canned vegetables and fruits.

4.      Revival of the agriculture sector would also decrease the current high rate of unemployment and it would discourage our young graduates from seeking employment abroad.

5.      Due to the political circumstances, large numbers of our farmers have  been away from their farms for many years, some are now too old to return to their profession, while their children never had an opportunity to engage in any farming operation. Under the reign of Saddam, farmers were forced out of their profession and were forced to live in collective camps, while others vanished in the Anfal campaign. Anfal: In 1988, the former Baathist Authority, depending on a chapter in the Koran(The Anfal), uprooted 182,000 village population and sent them to their death in the South of the country. Therefore their surviving children need a strong extension system to re-educate them on farming practices. Setting up adult education centers to teach farming practices to the emerging young farmers is a step in the right direction.

6.      To encourage farmers to utilize their lands, I recommend that a
land tax be laid on any agricultural land left uncultivated or unused.
Farmers who do not cultivate their land, may also relinquish such lands to others who can utilize it for agricultural purposes, or to lease such land to agricultural companies for crop or animal production

With respect to other measures, I would like to add the following points for consideration by the authorities:

1. The region's banks have lost public confidence, which is an unhealthy economic sign. It is important that the KRG takes immediate action to improve public confidence by enacting bylaws to guarantee that monies deposited in the banks are protected.  It is vital that all business operations are carried out through the banks and that financial transactions go through them as well. Funds deposited at the banks can be an important source of funding which can be borrowed for project implementation. Furthermore banks must stop dispensing excessive loans without sufficient collateral and thereby put their liquidity of funds in jeopardy.

2.          Transfer all excess security staff to the Ministry of Interior. Such staff could be reassigned to work at public facilities, become part of ongoing projects, municipalities, parks, airports, etc. Such a program will gainfully employ the thousands of security staff, who currently are idle and attend their work places only 50% of the time and spend the rest in meeting their personal needs by driving taxis, or working as laborers to gain extra cash during their leisure time.
3.          The recruitment of a thousand of so called ”guards” or un-necessary security staff has decreased the amount of available local labor that can be employed in necessary local rehabilitation works.
4.          Similarly the contingent of staff assigned under the name of “consultants” needs to be abolished. Only highly specialized staff with proven records must be employed for consultation duties.
5.          The government should declare it a rule that except for the sick, old, and the disabled, no one should be paid unless he or she is actively performing a duty. Salaried staff must attend their designated place of work each day for the hours required by law. “Shadow” workers must be completely eliminated.
6.           Our streets and highways have been overcrowded with thousands of imported vehicles. A higher tariff on personal autos and luxury cars can substantially lower imports. I suggest that importation of all personal and luxury cars be stopped for at least one year to minimize foreign expenses

It is important that the government initiates an annual taxation system of its citizens whose income passes a certain threshold. Monies received from such taxation can be used for financing certain city or village activities such as supporting fire departments, school activities, parks, building community halls, or to cover certain training needs of the citizens.

Oil money must specifically be used to increase our industrial and agricultural capabilities and to open vital venues for decreasing imports of industrial and agricultural items.

We can produce just about every food and feed items we need: Cereals (i.e. wheat, barley, and maize),potatoes, onion, legumes (i.e. chick peas, lentils, fava beans, etc.), in addition to sugar beets and oil crops of sunflower, and soybean. There is much room for expanding our dairy and poultry farms. Vast range areas are available to satisfy our livestock, sheep, goats, and cattle.

We may face some difficulties at the start, but eventually, once the local producers, the farmers find out that their products can be sold in the market, they will increase their efforts and improve production methodology to provide for market requirements in a short time. We need not import carrots from Australia, or lettuce from Iran, or other out of season fruits and vegetables from our neighbours. We do not need to import poultry and beef from South America. These items, with a minimum help from the government, can easily be locally produced.

Here I must emphasize the need for preserving agricultural land. We need every square metre of agricultural land and must be very careful to cease utilising this our most precious wealth for housing projects that can be put on any non-agricultural lands, such as rocky or barren lands of which we have plenty. We have already lost a great deal of our prime agricultural land in Kurdistan, and we cannot afford to lose anymore.

To generate animal feed, it is essential that we set up feed production centers and to do so we must support the production of maize and soybean, which are the two main ingredients of animal and poultry feed.

A Note on Current Wheat Subsidy:

The Federal Government of Iraq has been running a project of wheat subsidy for a number of years, with the idea that this policy ensures the increased production of wheat essential for food security. Under its scheme the government buys the local wheat at a price three times higher than on the world market. The world price is in the range of US$250 to US$300/ton, while Baghdad has set the purchasing price at about US$700/ton.

This policy not only has opened wide a door for corruption, but it has negatively affected production of other vital cash crops, such as maize and soybeans which are also important ingredients for livestock and poultry feeds. This policy is not only economically unsound, prone to corruption, but has also affected the local production of other essential crops.

It is strongly suggested that the Federal Government cancels this project and insure wheat is bought at the international price, minus the cost of transportation. Rumors indicate that certain individuals bring wheat from neighboring countries, bought at the international price of $250 per ton, and then receive $700 per ton from the hoodwinked authorities.

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