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Iraq in the regional economy and social sphere and the problems of reconstruction
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Iraq in the regional economy and social sphere and the problems of reconstruction
Аннотация
Код статьи
S032150750021325-9-1
DOI
10.31857/S032150750021325-9
Тип публикации
Статья
Статус публикации
Опубликовано
Авторы
Шкваря Людмила Васильевна 
ORCID: 0000-0001-6653-939X
Должность: Профессор кафедры политической экономии РУДН
Аффилиация: Российский университет дружбы народов
Адрес: Российская Федерация, Москва
Надир Ахмед Ахмед Надир
ORCID: 0000-0002-7087-7823
Должность: аспирант кафедры политической экономии экономического факультета
Аффилиация: РУДН
Адрес: Российская Федерация, Москва
Выпуск
Выпуск №8
Страницы
34-41
Аннотация

Статья посвящена анализу современного социально-экономического состояния Ирака и выявлению (а также изменению) его места и роли в региональной экономической системе Западной Азии. Объект исследования - социально-экономическое положение Ирака и его изменения в XXI в., а также роль и позиции страны в регионе, перспективы более активного ее включения в региональную и мировую систему хозяйства. Авторы приходят к выводу о том, что в стране сохраняется значительное количество проблем, многие из них возникают и поддерживаются на глобальном и региональном уровне.

Ключевые слова
Ирак, Западная Азия, региональное сотрудничество, региональная экономика и торговля, социальная система
Классификатор
Получено
28.03.2022
Дата публикации
16.08.2022
Всего подписок
11
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1 INTRODUCTION
2 Currently, the world scientific thought pays close attention to the study of the processes taking place in the socio-economic sphere of the region of Western Asia. This is especially true for a number of countries affected by external interference and internal destabilization as a result of the Arab Spring and the subsequent military conflict in the Middle East. As a result of such intervention, a number of countries, including Iraq, are facing serious difficulties. Their economy needs to be restored, and the population needs to develop the social sphere. These tasks have to be solved in the conditions of external “controlled”, or rather, already uncontrollable “chaos”, which makes recovery difficult.
3 Directions of this recovery are the subject of scientific research by both Russian and foreign authors. Russian researchers mainly believe that the basis for the restoration of the national economy of Iraq should be the energy and mining industries [13; 14]. In particular, the expert believes that the Iraqi economy, primarily GDP and the standard of living of the population, continues to depend on oil revenues in the post-conflict period, and this situation is likely to continue in the medium term [10]. This is due, according to researchers, to a high degree of resource dependence of Iraq [11].
4 Foreign authors focus on the development of Iraq's potential [12], its transport and logistics system (requiring serious reconstruction in the post-conflict period) and the state of water resources [5] and the need for structural changes [1; 2; 3].
5 According to the authors, it is important to analyze the place and role of Iraq in the regional economic and social system. It is the regional level that in the future can become a growth catalyst for Iraq.
6 IRAQ IN THE REGIONAL ECONOMIC SYSTEM
7 Iraq is one of the most controversial developing countries in Western Asia1. At the same time, Iraq retains a significant potential for socio-economic development (primarily resource) and significant problems. Today, these problems slow down effective development. At the same time, the country retains a huge influence on the situation in the region and even on the global economy. This is due to historical, geographical, resource, mental, demographic, and other factors. These factors, which act in combination, inextricably “interweave” the economy of Iraq into the regional and world economic system in several ways. Indicators of this “weaving” is, for example, the role of Iraq in Western Asia as one of the countries with the largest oil reserves (see table 1).
1. According to the UNCTAD methodology, 17 countries belong to Western Asia - Armenia, Azerbaijan, Bahrain, Georgia, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, KSA, Palestine, Syria, Turkey, UAE, Yemen. However, we will consider 14 countries in this article, excluding Armenia, Azerbaijan, and Georgia.
8 As seen from table 1, the share of Iraq in terms of both reserves (8.4%) and production (4.7%) of oil in the world is very high. At the regional level, according to these indicators, the country ranks 2nd after Saudi Arabia. In terms of reserves and production of natural gas, Iraq ranks not so high.
9

Table 1. Hydrocarbon reserves and production in Iraq and West Asian countries and share in the world, 2020

10 Compiled according to: BP statistical review of world energy 2021. 70th edition. >>>> markets.html
11 Because of these objective conditions, the extractive industry is the backbone of the country's national economy. It provides Iraq with most of the foreign exchange earnings, as other countries in the region and the world buy Iraqi hydrocarbons. But some part of the oil reserves is located in Iraqi Kurdistan, so there are often problems with obtaining these foreign exchange earnings for the national budget [15].
12 In terms of GDP production (see table 2), Iraq has occupied a more modest place in the region over the past 50 years. Iraq's GDP has grown in value by more than 52 times since 1970 (see table 2). This corresponds to the growth of the regional gross domestic product. Iraq in 2009-2020 consistently ranked 5th in terms of GDP production in the ranking among 14 countries in Western Asia (see table 2). This place has remained in 2020 when the GDP of Iraq (as well as Syria, and other countries in the region and in the world) has decreased by more than 11%. The reason for this reduction was the spread of COVID-19 and a decrease in demand on the world market, especially for hydrocarbons.
13 Table 2. GDP of Iraq and West Asian countries in 2000-2020 ($ mln at current prices at the current exchange rate)
14

15 Compiled and calculated according to: UNCTAD. https://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx
16 The share of Iraq in the total GDP of the West Asian region is traditionally about 6% (see table 2 and Chart). In some years, fluctuations in this share were noted due to external and internal problems. But in general, this is a fairly good level, since in Western Asia there are much richer countries with more diversified and stable economies.
17

18 Chart. Dynamics of Iraq's GDP in 1970-2020 $ mln in current prices at the current exchange rate,
19 and the change in Iraq's share in regional GDP (%).
20 Compiled according to table 2.
21 Particularly rapid growth in Iraq's GDP began in the 21st century. In the 1970s early 1980s, this growth was low. The 1990s was the most difficult period for the Iraqi economy over the last decade of the XX century. The decline in GDP was accompanied by a reduction in Iraq's industrial and agricultural potential. The state of transport and infrastructure systems has deteriorated in the country, and the level of per capita income, the standard of living in general and a number of other social indicators have significantly decreased [11]. In addition, the researchers note that the pressure of anti-Iraqi economic sanctions has increased significantly in the last decade of the XX century, which still causes concern among scientists, politicians and practitioners about the possibilities and prospects for the restoration and development of the country's national economy. Moreover, these sanctions have a negative impact on its main industries, primarily energy [8; 9].
22 In 2000-2020, GDP production grew erratically (see Chart). But this instability is related to a large extent with external factors. Most of all (apart from sanctions) GDP is associated with the volatility of world prices for hydrocarbons. Consequently, the most important problem of the national economy of Iraq is the structural sectoral imbalance. This imbalance, however, is also inherent in most other oil-producing countries in the region, for example, the Gulf Cooperation Council (GCC) states. But, realizing the threats that the structural imbalance entails, these countries have been making more or less successful attempts to diversify their economies for a number of decades [7]. Iraq failed to change the structure of the national economy. One way or another, the extractive industry remains the basis for the national economy of Iraq. It has the highest productivity and contribution to GDP and is the main catalyst for Iraq's economic growth.
23 As for the current situation and prospects, according to IMF estimates, Iraq's GDP increased to $196.27 bln in 2021. Iraq's economy is also expected to grow in 20222. In 2021, Iraq's recovery has been focused on business and investment opportunities in key priority sectors of the economy, including: industry, infrastructure and roads, agriculture, healthcare, banking and finance. The World Bank noted that economic growth in Iraq is gradually recovering. This is partly due to the growth of economic activity in non-oil segments. Experts expect improved global oil market conditions to boost economic growth over the medium term and lead to fiscal and external surpluses from 2022 and reverse the recent increase in debt3.
2. IMF: Regional Economic Outlook, Middle East and North Africa, 2019. 75 р. >>>>

3. Iraq's Economic Update - October 2021. >>>>
24 IRAQ IN REGIONAL TRADE
25 Iraq's foreign trade is also one of the catalysts for Iraq's economic growth. But the volume of Iraq's foreign trade has declined somewhat over the past 10 years. There are at least two reasons for this trend: these are the volatility of hydrocarbon prices on the world market in recent years (in particular due to the coronavirus), and the military conflict that took place in the territory of Iraq and Syria. It was ended in 2017 and brought enormous destruction to the national economy, including its hydrocarbon sector. However, (see table 3) it shows that Iraq's share of regional exports and regional imports has declined by about 1% over 10 years. The country ranked 5th in 2020 (in 2010 it was 4th) in terms of external trade. The share of Iraq in regional exports and regional imports decreased by about 1% over 10 years, as can be seen from table 2). However, this circumstance cannot be considered a serious problem for the country because it can be overcome thanks to the existing potential. But in 2020, a negative balance of Iraqi foreign trade was recorded, which raises some concerns. This can make it difficult to acquire goods and services needed for the country from abroad. Economic sanctions against Iraq also limit the ability of Iraq’s imports.
26 Table 3. Dynamics of total exports and imports of Iraq and West Asian countries in 2010 and 2020 ($ mln at current prices at the current exchange rate, and %)
27

28 Compiled according to table 2.
29 Therefore, Iraq is oriented very much towards regional partners in foreign trade (see table 4).
30 Table 4. The share of regional trade in the total volume of exports and imports of Iraq in 2016-2020 ($ ths. at current prices at the current exchange rate, and %)
31

32 Compiled according to table 2.
33 Statistical data confirm the following. The total export of Iraq amounted to $20,380 mln in 2000 and $41,738 mln in 2020, i.e., slightly more than doubled. Regional exports over the same period increased from $1018.3 mln to $6022.9 mln, i.e., more than 6 times. Iraq's total imports increased from $13,210 mln to $44,484 mln, i.e., 3.4 times. Regional imports increased from $2260.1 mln to $13,631.7 mln, i.e., 6 times. Thus, we note that the volume of regional trade of Iraq has grown at a faster pace in the last 5 years. This allows us to draw a conclusion about a deep “embedding” of Iraq in the regional economic system. We can assess this trend as promising and positive for the economy of Iraq and entire Western Asia, including the stabilization of the situation in the region.
34 But everything is ambiguous. Indeed, a significant share of Iraq's foreign trade, primarily its imports (30% in 2020), falls precisely on regional partners (see table 4). But this share has been declining in the last 5 years. One of the reasons for this reduction can be considered the coronavirus pandemic. At the same time, the problem in this area, in our opinion, remains the instability of Iraq's regional (and international as a whole) trade, which is confirmed by statistical data. The instability of foreign trade is interconnected with the instability and sectoral imbalance of GDP. We can also note the imbalance of Iraq's trade in the countries of the region. According to UNCTAD statistics, Turkey was Iraq's largest partner in 2020. Its share was almost ¾ of Iraq's imports and exports to Western Asia. We consider this as an important regional success for Turkey, which is committed to the development of economic integration in Western Asia and North Africa. Turkey has plans to create a free trade zone in a group of countries that were united by the toponym “Levant” in the Middle Ages.
35 These countries were provinces of the Ottoman Empire, and here Turkey is currently striving to take a leading position, so to speak, “economically pull” them to itself. Iraq in this group occupies an important place for Turkey as an oil exporter and a large economy. Researchers from Turkey have been conducting research for a number of years, the main idea of which is the theoretical substantiation of the significant economic benefits for the countries of the Levant from the creation of a free trade zone. These benefits, as studies show, can be especially significant in the key industries of these countries, including agriculture, infrastructure, services (tourism and finance, including investment) [4; 6].
36 Iraq's traditional regional trade partners also include Jordan, Syria, Lebanon, and the United Arab Emirates. The basis of this cooperation is the contractual and legal framework, which is being updated in the XXI century. So, in February 2019, Iraq and Jordan signed a series of bilateral economic agreements aimed at developing mutual trade and other areas of cooperation, primarily in the energy sector. In the same year, a summit of Iraq, Jordan and Egypt was held in Cairo. The purpose of the summit was to discuss the creation of new economic opportunities in mutual trade, foreign direct investment and tourism, and the creation of new jobs. Trade and economic cooperation between Iraq and Syria have intensified in recent years. The countries have held numerous summits in recent years.
37 With some Western Asian countries, especially Israel, Palestine, some GCC states, Iraq traditionally either does not maintain trade relations at all (Israel) or maintains them at a low and/or irregular level (for example, Saudi Arabia). This situation does not contribute to the strengthening of regional stability and the growth of the regional (and Iraq’s) economy, although it corresponds to the specifics of the Arab region. But the government of Iraq is striving to solve the problems of foreign trade imbalance and to develop trade relations with partners in the region and with third countries4.
4. iraq National Development Plan 2018-2022. >>>>
38 IRAQ IN THE REGIONAL SOCIAL SPHERE
39 The territory of Iraq occupies about 11% of the total area of Western Asia. This is the third place after Saudi Arabia and Turkey in this indicator. But in terms of population in Western Asia, Iraq ranks second after Turkey. In 2020, the population of Iraq was estimated at about 40 mln people. This amounted to 15.4% of the total population of the region. Thus, Iraq continues to play an important role in the region in terms of population. According to UNCTAD estimates, the country will maintain and strengthen this position. By 2050, according to UNCTAD5 forecasts, the population of Iraq may increase to more than 43 mln people. This will amount to 19.5% of the regional indicator. The population growth rate in Iraq is quite high. The average age of a resident of Iraq in 2020 is 21.4 years, i.e., it is a country with a young population, which is typical for Western Asia as a whole. Iraq's workforce accounts for only 3.7 mln of the country's total population due to the high dependency ratio seen in other countries in the region. Unemployment in the country exceeded 14% in 2020, which is higher than the regional average (11.8%) and even higher than in Syria (10.26% in 2020). Iraq ranked 5th in the region for this indicator. But for Iraq, the objective explanation for such a high rate of unemployment, especially among young people, can be considered the destruction in the national manufacturing sector and infrastructure, which were the result of military operations in the territory of Iraq.
5. UNCTAD. >>>>
40 Table 5. Dynamics of per capita income in Iraq and Western Asian countries in 2000-2020 ($ ths.)
41

42 Compiled according to table 2.
43 The dynamics of per capita income in Iraq and its correlation with the regional indicator are presented in (see table 5).
44 As seen from table 5, since the beginning of the new century, this indicator has increased 4 times in Iraq, but, despite this, it still remains unreasonably low, especially considering that Iraq is the 2nd country in the region in terms of reserves and oil production. GDP per capita in Iraq almost doubled through 2000-2020 (Except for some years). At the same time, the Ginny index for 2020 was 0.633.
45 In many ways, this situation is due to the fact that a number of problems persist in Iraq in the social and labor spheres, among which the researchers [5] note:
46
  • a high level of intra-country social inequality and regional differentiation;
47
  • the need to create jobs and a high level of unemployment;
48
  • deterioration in the level of education;
49
  • deterioration of medical care for a significant part of the population (let's add - especially in the context of the global pandemic);
50
  • high proportion of the population living in unfavorable environmental conditions;
51
  • high death rate from violent causes;
52
  • food security is not fully ensured;
53
  • low standard of living persists.
54 A lot of these problems are common to other countries in the region, such as Syria. But stating this fact does not make them less acute for Iraq.
55 At the same time, the situation with the level of per capita income in Iraq is practically not improving qualitatively, which is confirmed by the statistical data (see table 5). For example, while in 1970 the per capita income in Iraq was 2.8 times lower than the world average, in 2020 it is already 2.5 times lower, i.e., the situation is practically unchanged. This is due to the persistence of destabilizing factors that hinder the activation of economic growth, the solution of social problems, the stabilization of the financial situation, and sometimes even blocking these processes in Iraq.
56 We include these factors:
57 - ongoing anti-Iraq sanctions;
58 - military actions that took place in the territory of the country;
59 - falling oil prices on the world market;
60 - regional instability;
61 - global instability (for example, COVID-19).
62 At the same time, based on the analysis of the place and positions of Iraq in the West Asian region, we come to the conclusion that, on the one hand, the country has a certain potential for socio-economic development and strengthening its position in the region, and on the other hand, significant problems and imbalances that impede such strengthening.
63 CONCLUSION
64 Thus, after conducting a study of the situation of Iraq in the region of Western Asia, we come to the following conclusions. First, Iraq has a significant potential for socio-economic development. This potential is currently based on the extractive industry (which can be regarded as an important advantage of the country) and foreign, including regional, trade. Foreign trade relations of the country are developing quite actively, in particular in the region. Population growth can provide an increase in the productivity of the national economy in the future.
65 However, the persistence of numerous socio-economic problems has not allowed the country realizing the existing benefits so far. Thus, the physical destruction of production facilities and infrastructure in Iraq requires serious financial investments in their restoration and modernization. But the volatility of world oil prices and the undiversified national economy do not provide the country with the opportunity to do so. The non-oil segment, including infrastructure and services, is developing quite slowly so far. The deterioration of the quality of the social sphere and the growth of unemployment, especially among young people, are slowing down the development of Iraq.
66 Accordingly, the most important task of Iraq is to restore the national economy after the end of the military conflict. This recovery, in our opinion, could rely more on a regional base. Which, in turn, requires the development of the legal segment and the adaptation of existing international agreements to rapidly changing conditions in recent years both in the region and in the world.
67 In our opinion, the maintenance of security in the economic, social and other spheres is of great importance among Iraq's priorities. Maintaining security is largely possible on a regional basis, which, in our opinion, enhances the importance of regional cooperation based on its diversification.

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