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Kurdistan Regional Government – the
Impediment to Real Economic Growth
18.8.2008
By Rauf Naqishbendi
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August 18, 2008
Sustainable economic growth supported by a
well-thought out monetary policy and fiscal
discipline is a necessary prerequisite for economic
prosperity. The economy is influenced by a host of
factors, the most significant of which is the
political system. Government is the key to the
economic condition of a nation, thus there is a
direct relationship between the success or failure
of those in power and the state of the economy. A
modern banking system channeling business
transactions is the agent that renders payment,
lending, borrowing, and currency exchanges along
with a host of investment arrangements.
The central bank oversees monetary policy, referred
to as economic contraction or expansion, through
interest rate regulation. The central bank and the
banking system combine to fuel the engine driving
the modern day economy. That being said, there
is no adequate economic system in the Kurdistan
region. |
Rauf Naqishbendi |
There is
neither a banking system nor a monetary policy.
Business and financial deals are made in the most
primitive way, compared to today´s economic models
adapted by developed economies.
Ridiculously, in all of Iraq, economic ´policy´
operates in much the same way as the world did
before banking systems were in place. Kurdish
leaders, who are proud of their achievements, are no
different than their Arab counterpart in the south,
and they are as ignorant
as how a modern world economy operates. Developed
countries have a host of government and
non-government agencies which furnish crucial
statistics regarding the health of their economies,
including employment, inflation, industrial output,
trade account surplus or deficit,www.ekurd.netconsumer
confidence, retail sales, and consumer spending.
Based on the compiled data, economic expansion or
contraction can be determined, and the central bank
can adjust interest rates to boost or cool the
economy. At the same time, federal government,
through its fiscal policy, can take necessary
measures, including adjusting the rate of taxation.
Sadly, none of these checks and balances exist in
Kurdistan, and yet both Kurdish leaders continue to
speak about the economy as though they really
understood what it is all about.
A modern banking system is essential to the economy,
and its function stretches beyond offering lending
and saving to individual customers. It employs
investment opportunity in financial markets, as well
as provides working capital for business for both
financial enterprises and individual entrepreneurs.
Additionally, it offers secure safety deposit for
large cash holdings with dividends.
Without a banking system, there is no real economic
expansion. Take, for example, individual savings in
Kurdistan, currently all in cash and hidden. These
cash hideouts are enough to run many banks with
formidable balance sheets. The banks usually pay
interest, and in the process of running its
business, it must hire personnel to do the job.
First, it creates many jobs at various levels;
second, it has to invest deposits to pay both its
employees and interest to its depositors. All
together, it creates a business climate, where
employees draw stipends and circulate money back
into the economy through spending. Banks, meanwhile,
make working capital available for businesses at a
determined payable interest. With this capital,
business is able to expand resulting in buying more
equipment and employing more people, again helping
the local economy. All of this can be achieved
without any foreign assistance or even government
assistance. It can be done through housing money -
now essentially hidden under rugs - in a safe
banking institution. Currently, due to the lack of a
reliable banking system, people with money
throughout Kurdistan are depositing their funds
abroad, resulting in money leaving the country,
benefiting foreign banks, and starving the local
economy from much needed investment.
Banking system needs to be regulated by government
so that deposits and investment in a bank are
guaranteed against unscrupulous individuals and
unethical financial institutions. This brings us to
the issue of confidence and trust. Financial
institutions can only operate if there is trust and
faith in the political system. Political systems
regulate and oversee the banking system, therefore
the political system itself must be trustworthy and
credible. In Kurdistan, the economic chaos is
directly attributable to the two Kurdish leaders who
have monopolized power and divided the Kurdistan
region between themselves. There is no term limit on
their rule, and because of their lack of ethics,
their selfishness, and their insatiable greed,
people have no faith in the phony government they
have constituted.
In a systematic, managed economy, interest rates are
determined by market forces, and subject to
taxation. In Kurdistan, when businesses need capital
there is no bank from which to borrow. Funds must be
borrowed from individual investors who can set
interest rate. At times, the borrowing rate has
exceeded fifty percent. Under this tight credit
market and the inability of businesses to raise cash
to finance expansion, there is limited opportunity
for business growth, thus the economy remains
stagnant and without measurable growth.
Because of the lack of fiscal and monetary policies,
the pivotal data elements that determine the health
of an economy do not exist in Kurdistan. As a
result, the rate of inflation is unknown. There is
no reliable data to show the rate of unemployment or
any other significant data that can be counted on to
reflect the true state of the economy. One may argue
that Kurdistan is a young nation and needs more time
to develop an economic model. But Barzani and
Talabani have been in power for seventeen years and
they have taken no steps towards establishing a
better business environment or a stable,www.ekurd.net
modern economy. The
level of corruption that exists has led to a total
lack of faith in their leadership.
Well managed economies progress according to a
systematic planning based on resources, the needs of
the nation and the population growth. Economic
planning for a nation requires utilization of all
talents to its full potential, indiscriminately. But
in Kurdistan, no matter how capable a person might
be, he is not allowed full participation unless he
supports Kurdish leadership. It is all about
nepotism, cronyism, and favoritism – all conditions
under which the economy will not advance. This is
what has transpired in Kurdistan.
Rauf Naqishbendi is a contributing columnist for
Kurdish Websites, American Chronicle and has written
Op/Ed pages for the Los Angeles Times. He has just
completed his memoirs entitled "The Garden Of The
Poets" which reads as a novel depicting his
experience and the subsequent 1988 bombing of his
hometown with chemical and biological weapons by
Saddam Hussein. It is the story of his people's
suffering. Rauf Naqishbendi is a software engineer
in San Francisco Bay Area.
The contents of this article reflect the author's
personal opinions, and we accept no responsibility
for the views or opinions expressed in the articles
either direct or indirect.
Copyright, respective author or news agency,
americanchronicle.com
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