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 Bloated public sector in Iraqi Kurdistan needs to be reined in 

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Bloated public sector in Iraqi Kurdistan needs to be reined in  23.6.2011
By Shwan Zulal - ekurd.net






June 23, 2011

In a rare report mentioning fiscal and employment statistic in Kurdistan Region by Statistical office in Slemani (Sulaimaniyah) published by Awana newspaper. The figures show that in Slemani Province alone, the government employs 249000 and an additional 77000 are on the payroll as pensioners, furthermore, 60000 receiving other benefits from the state. The figures showing private sector employment is still not known. However, looking at the size of state payroll it is clear that it dwarfs the private sector.

The figures published are staggering as the report also shows that the unemployment rate has gone down to 14 per cent across Kurdistan Region and stands at 11.9 per cent in Slemani province. Only last week the Iraqi central government has announced that it expected that inflation would stay in single digit numbers for this year, but observing wage rises and property prices in Kurdistan, the inflation figures can be much higher.

The details of the report are not yet out and it is hard to tell how accurate the assumptions and the auditing of the figures are.                               
Nevertheless, the figures published are worth looking at as the job market is a good indicator for the general state of the economy. Awena mentions that the unemployment figures in 1992 in Kurdistan Region after the first gulf war were around 56 per cent in Slemani province and stand at 11.9 per cent at the moment. Viewing these figures at a first glance the achievement looks immense. However, looking at the figures closely, they show a different picture.

Kurdistan Region like the rest of Iraq has very little industry left, either through lack of investments or the government policy of depending on oil and gas revenues. Overdependence on oil has crippled private enterprise and choked innovation. The agricultural sector and industry has suffered the most. The majority of goods and services in Kurdistan Region and Iraq are imported and taxation is only about 7 percent of government income.

The important figures are the size of public sector employment and pension provisions. Although there has been a surge in the number of private enterprises in the region but their numbers are very limited. Private sector employment pay is higher on average and productivity levels are higher too. However, the number of employees are fewer than that employed by the state and government policy has not encouraged private sector expansion.

It is understandable that the Kurdish government has done a good job by providing people with jobs pulling many out of poverty. Nevertheless, this policy has consequences mainly of inflation and a dispiriting private sector. While the unemployment rate has come down considerably in the last 20 years, productivity has not increased. Moreover, looking at the state of public services,www.ekurd.netnamely hospitals and municipalities, it becomes apparent that the productivity level of the work force is next to none. The government may have good intention to create jobs for its citizens, but the facts shows that either the government is creating these jobs as part of a patronage system to prop up itself, or they do not understand the basics of macro fiscal policy.

Iraq has challenging security issues and doing businesses is harder than in Kurdistan. Nevertheless, Kurdistan Region has been heaven for new businesses and so far, the large corporate companies are few and mostly owned or have strong ties with the two main incumbent political parties.

Kurdistan Region president, Massoud Barzani, in March said that his government would introduce new legislation to reform competition laws, and ban market manipulation, nevertheless, so far nothing has been done and the few companies which have political ties still control most markets and are stifling competition.

Oil revenue is set to continue growing and the size of the state with it too, but the state appears to be growing much faster. At this rate of growth, the public sector is becoming more bloated and government would risk going into a deficit within the decade without having spent the money on infrastructure and services. Failing to encourage the private sector and enabling it to contribute to the national income and provide competitive employment alternatives for idle public sector workers, the future fiscal outlook for the region does not look as sound as some might think.
  

Shwan Zulal is a Kurdish Blogger, a regular contributing writer for ekurd.net, interested in political and legal Reform in Kurdistan, KRG, Iraq and current Kurdish affairs, including oil exploration companies and relevant legislations. You may visit Zulal's website at http://kurdishviews.blogspot.com/

Copyright 2011 ekurd.net

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