Agenda of Basra Province English... · 3- Chamber of Commerce of Basra 10- Society of Tomato Producers in AzZubeir 4- The Iraqi Society to Defend Consumer Rights 11- Fisherman Society

Agenda of Basra Province

1

This agenda was produced by business associations in Basra Province

in cooperation with the Center for International Private Enterprise (CIPE).

Contents

Page No.

Message of CIPE 2

Message of Business Associations in Basra Province 4

List of Business Associations and Economic Organizations

Participating in Producing the Business Agenda of Basra Province

6

List with Names of Coordinators of Committees of Business

Agenda for Basra Province

6

List of Names of the Consultancy Team to Review Business

Agenda of Basra Province

6

Introduction 8

Common Characteristics of Sectoral Problems 10

The Private Agricultural Sector 16

The Private Industrial Sector 42

The Private Trade Sector 62

The Private Transport Sector 77

The Private Banking Sector 92

2

Esteemed Governors, Provincial Council and Provincial Investment Commission members,

A provincial business agenda (PBA) is a vital tool for the local business community to encourage investment by

stimulating business activity and economic growth. Private sector organizations in many countries of the world, including Egypt, Iraq,

Montenegro, Romania, Russia, , and the United States, develop agendas that help identify the legislative and economic reforms

necessary to advance their countries‟ economies. With such agendas, organizations have succeeded in prioritizing economic and

legislative issues that have led to democratic, market-oriented economic reform.

In developing a PBA, private sector organizations mobilize the business stakeholders that they represent to influence

policy reform by setting legislative and regulatory priorities and clearly communicating them to policymakers. Often, through clear

communication, the private sector can attract public and government attention to the obstacles that obstruct development and growth of

the overall business climate. The private sector can also offer concrete recommendations and solutions to improving the business

operating environment. A provincial business agenda educates members of the private sector on public policies that affect them and their

business interests. The process allows private sector representatives to present the concerns of the business community to government

officials in a unified voice and increase the likelihood that the agenda will be adopted.

In Iraq, CIPE has provided technical and financial support to numerous organizations in order to support their institutional

capacities and strengthen their capability to play an effective role in democratic and economic processes. CIPE started supporting work

on PBAs in Anbar, Basrah, and Najaf in 2008 with business organizations in multiple sectors. The business community, through their

private sector organization representatives, identified the economic sectors that they felt were pivotal in advancing and promoting Iraq‟s

economy at the provincial level. The private sector organizations then identified the main barriers in those sectors and offered solutions.

Workshops involving the leadership of business organizations and specialists and researchers in provincial economic affairs were

organized. The events gave participants a chance to discuss their ideas, propose solutions, and contribute to economic development in

these crucial sectors. The resulting agenda is the fruit of this effort.

Center for

International

Private

Enterprises

1155 15th

Street, NW, Suite

700

Washington, DC 20005

Tel: (202) 721-9200

Fax: (202) 721-9250

www.cipe.org

[email protected]

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When business associations come together to promote a core set of market-oriented policies, they are much more effective

than if they pursue policy change individually. CIPE will continue supporting such organizations in making their voices heard by

decision-makers. This agenda constitutes a step that the private sector‟s organizations have taken to define their role in achieving

sustainable provincial level development in a newly democratic society. Success is to be attributed to all – organizations and individuals

alike – that help promote the standard of living for all people in the province.

I would like to extend my deep appreciation to the organizations and individuals that have contributed to finalizing the

Basrah business agenda.

Abdulwahab Alkebsi

CIPE Regional Director for the Middle East and Africa

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Message from the business associations in Basra

By the Name of God; the Most Gracious, the Most Merciful

Your Excellencies,

Governor of Basra, President of Basra Province Council, and Chairman of Provincial Investment Commission of Basra Province,

For many decades and throughout the successive governments of Iraq, the private sector has not assumed an effective role in the

country. Whenever mentioned, the private sector is accused of being, and described as, the intrusive, uninvited “guest”. In the new Iraq,

we want to lay the base for a distinct private sector that can serve Iraq and its people.

In an important era of construction and development and the modernization of Iraq, we need to make use of all the capacity

available in order to build a modern economic system that can cope with the level of regional and international development. In this era,

as such, all institutions, functions and agencies of the private sector must assume their responsibilities towards the country and the

citizen. Business leaders need to be persistent in setting the framework of the new economic system and supporting the efforts of the

national government to implement economic reform programs, and development plans. The private sector should also assist in creating

investment policies in order to direct and mobilize all efforts to serve the Iraqi economy and society.

In assuming responsibility to help develop and improve the local economy in Basra, the business associations in Basra have

specifically identified the main challenges facing economic development on both the local and national levels. In addressing these

challenges, we have also produced serious solutions to overcome these challenges. The Business Agenda of Basra, which took one year

to produce, starting in August 2008, with the help of CIPE could set the groundwork for a new private sector culture; a private sector that

can rectify some of the imbalances in the current system and partner with the public sector to build an advanced state.

We hope this endeavor will be welcomed and looked after, and that the opportunity will be made available for both the public and

private sectors enter into a real partnership. We hope that the dialogue and deliberations continues, and strengthens, to realize the

contents of this agenda on the ground and to support the private sector role in serving our beloved Basra and Iraq.

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May God help you all to achieve this aspiration.

Signed by:

Iraqi Society to Defend Consumer Rights

The Center of South to Develop the Iraqi Economy

Iraqi Businessmen Federation/Basra Branch

Chamber of Commerce of Basra

Agricultural Engineers Association

Iraqi Industries’ Union

Iraqi Center for Investment Studies &Information

6

List of Business Associations and Economic Organizations contributing to the Business Agenda of Basra Province

1- Iraqi Businessmen Federation/Basra Branch 8- Agricultural Engineers Association

2- The Center of South to Develop the Iraqi Economy 9- Farmer Cooperatives

3- Chamber of Commerce of Basra 10- Society of Tomato Producers in AzZubeir

4- The Iraqi Society to Defend Consumer Rights 11- Fisherman Society

5- Iraqi Industries‟ Union 12- Society of Bee-keepers in Basra

6- The Islamic Commercial Union 13- Federation of Shipping and Unloading Companies in Basra

7- The Iraqi Center for Investment Studies and Information 14- Farmers of Palm and Dates Presses

List of Names of Coordinators of Business Agenda for Basra Province

1- Dr. Muna Turki Mousa

2- Dr. Nabil Ja‟far AbdulRida

3- Dr. Hussein Ali Hashem

4- Dr. Amjad Sabah Abdul‟Al

5- Dr. Ahmed Jasem Moh‟d

6- Dr. Ra‟ed Zaki AbdulGhani

List of Names of Consultative Team to Review the Business Agenda of Basra Province:

1- Dr. Abdul Jabbar Aboud Al-Halfi

2- Dr. Yousef Ali Al-Asadi

3- Dr. Nabil Ja‟far Abdul Rida

4- Dr. Muna Turki Mousa

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Basra Province Gate

8

Introduction

Basra lags behind in all walks of economic life and suffers due to its weak, poor economy. Its economy is characterized by clear

infrastructure inefficiency, and poor or nonexistent electric, water and municipal services. The productive sectors such as agriculture and

industry are still using outdated production methods and machinery which has made them incapable of coping with citizen‟s needs and

competing with foreign imports. Job opportunities for citizens are also insufficient, hindering efforts to curb the continued unemployment

problem in Basra. All these factors have yielded further macroeconomic imbalances and deteriorating living standards for the people of

Basra.

The private sector had failed to assume an effective role in the economic life of Basra prior to the collapse of the former regime

in April 2003 due to the several governmental restrictions imposed on the private sector. These restrictions had turned the private sector‟s

role into a mediocre one, at best. Its role remained limited and an impersonation of effective business, even for those projects considered

to be successful. Thus, the community was deprived of an effective private sector that enjoyed a high degree of flexibility and clear

economic vision that, if rationally invested, would substantially contribute to the economic development of Basra.

Due to the strategic importance of Basra and its enormous economic resources including oil and natural gas, agriculture and

water, and despite the problems and difficulties challenging the private sector in Basra, the province can assume a pioneering role in

supporting the local economy and achieving sustainable economic development in Basra in particular and Iraq in general. It can

contribute to achieving the aspired to political, economic and social goals of stability by reviving the linkages between the economy, the

government and the society within an integrated system. The private sector can help support production, management, and marketing

competitiveness in the local economy of Basra, and decrease poverty, and unemployment because of skills and experience it possesses in

agriculture and construction. It can also help provide several commodities to support textiles, food manufacturing, construction, heritage

crafts, trade, transport, and banks.

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There are several methods to develop and support the private sector, including the national and local business agenda. A business

agenda is seen as a pivotal tool used by the business community to attract investments and motivate business activity as well as improve

economic growth. An agenda also helps to mobilize and direct the private sector in influencing public policy by setting legal and

regulatory priorities for decision makers.

The Basra Business Agenda identifies the laws and regulations that impede business activity in Basra and analyzes other

problems that the business community in Basra face, particularly the poor infrastructure, administrative corruption and lack of

transparency in the implementation of economic policy, as well as the lack of a clear economic philosophy. This agenda provides

recommendations and specific reforms to remove these impediments and improve the business environment. The agenda has raised the

private sector‟s awareness, educated it on the public policies affecting its operation, and provided the space to collectively voice private

sector concerns that will be heard by local government officials, the Provincial Council, and Basra Investment Commission. These

factors all increase the possibilities of adoption of this agenda‟s contents.

The core objective for the Basra Business Agenda is to promote participation and interaction at the local and regional levels to

address needs and promote the business community‟s feeling that they contribute to the development of policies affecting their

businesses. Indeed, the ability of business associations to set certain market oriented policies will be much larger when unified; that is,

they can possess better capabilities and be more influential.

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Common Attributes of Sectoral Problems

Introduction:

The misconception of what a market oriented economy is and the poorly-planned adoption of it has harmed the private sector,

which already suffers from being dumped with counterfeit imported goods. Thus, the sector cannot compete due to the low cost of such

goods, and tariff barriers and bureaucratic procedures imposed on the business sector in Basra. Other problems relate to security of

course. Therefore, it has become an imperative need for the state to exercise a better regulatory role in the Iraqi economy. The business

environment in Basra is in need of several requirements and demands that can be, directly or indirectly, provided by the state.

Although each of the sectors has its particular problems, there are some common challenges and problems that the five sectors

included in the study (agriculture, industry, commerce, transport, and banking) suffer from. This calls upon the concerned officials,

whether policymakers or those in organizations directly or indirectly involved in the economic sector or in the Basra business

community, to adopt balanced visions and policies to secure the maximum level of production and development through optimal use of

Basra‟s resources. Therefore, the government must make standardized decisions based off of a comprehensive economic vision to

develop the business sector in Basra. Businessmen, on the other hand, must have their efforts harmonized to solve their problems in line

with and a problem-solving strategy to assist Basra‟s historically deeply rooted private sector presence. The committee overseeing the

final assessment of the Basra Business Agenda has agreed on the main problems identified in the agenda, which are as follows:

1- Poor infrastructure.

2- Absence of state of the art technologies and materials that can handle emerging developments worldwide.

3- Limited capital in and underdevelopment of the financial sector.

4- Poor training, practice, and soliciting of private sector experiences and best practices to benefit further economic development.

5- Unstable security situation.

6- Absence of standardized laws to regulate all sectors (multiple laws).

7- Administrative and bureaucratic impediments.

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8- The prevailing financial and administrative corruption which frustrate the business sector.

Problems by Sector

First: The Agricultural Sector

- Low quantities and high saline level of water in the Shatt Al-Arab and its tributaries.

- Migration of farmers from their agricultural land to cities to work as the market has been opened to agricultural produce

from all over the world.

- Human occupation of areas especially in Shatt Al-Arab, Qurneh, Abu Khseib and AzZubeir.

- Spread of diseases among livestock, which are left untreated by the relevant authorities, diseases spread by the increasing

insect and pest population resulting in decreased numbers of palm trees and the industry‟s reduced productivity.

- Poor and ambiguous strategy applied by the government to advance the agricultural sector.

Second: Industrial Sector

- Poor financial and technical capacities of industrialists compared to their peers in neighboring countries, which has

resulted in poor competitiveness against the imported goods.

- The policy of openness which has made it possible for low quality counterfeit goods to inflow from all over the world for

low prices. This has resulted in destroying the local industries in Basra.

- The lack of governmental and private banking credit for industrialists and the hesitant attitude to give credit due to

security risks.

- High prices of fuel which result in high costs of production especially when the power supply current is off.

- Wrong understanding by the government of the issues related to market economy and economic freedom which resulted in

excluding the industrial sector from government‟s priorities.

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- Foreign investor fear of partnering with the private sector of Iraq, resulting in the deterioration of Iraq‟s private sector.

- Inability of the private sector to legally own the land on which factories, plants and workshops are constructed.

- Stale fixed capital.

- Lack of a government plan to develop small and medium sized industries.

Third: The Trade sector

- Random openness to importations has caused serious harm to the foreign trade of Iraq, including Basra‟s exporters.

- Non-restricted importation of low quality counterfeit goods that cause harm to public health.

- Lack of supervision and monitoring of imported goods at border points and financial and administrative corruption.

- Ineffectiveness of the Institute of Metrology and Quality Assurance in quality control due to chronic corruption as

identified by Transparency International.

- Public banks in Basra do not open letters of credit for exporters and importers. Letters of credit are a common banking

practice all over the world.

- Poor performance of commercial attachés due to incompetence as they are assigned to office per the quota system.

- There are speculators dealing in importing and exporting goods while not registered at the Chamber of Commerce in

Basra, which contributes to the prevalence of commercial fraud.

Fourth: Transport Sector

- Poor transportation infrastructure in Basra province due to wars and destruction of ports, transport roads, and bridges.

Also, the poor air transport services and the departure tax that is not common in most airports worldwide.

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- The varied customs duties imposed on imported goods and the multiple agencies setting them. Also, multiple agencies

issuing orders and instructions to transport companies operating in the port, which has resulted in financial and

administrative corruption in ports as well as harm to truck drivers and traders.

- Poor quality of services delivered to carriers at the border points.

- Corruption and fraud exercised in road paving and asphalting projects, which causes harm to vehicles carrying goods and

passengers.

- High prices of transport fuel; which results in high transport fares for both passengers and goods; which in turn results in

high prices of those goods and high inflation rates.

- Small rental car firms have vanished. This is a negative sign as these firms facilitate transport of citizens from the city to

the airport or other border points for competitive prices.

Fifth: The Banking Sector

- In general, the banking sector in Iraq is still not strong. This is especially true of Basra Province where banking practices

and developments are still lagging behind the international banking sector.

- Shortage of financial assets in private sector banks.

- Lack of banking technologies and bad marketing mechanisms.

- Lack of awareness among the public on banking issues.

- Limited credit opportunities for projects and individuals.

- Banking operation affected by the instable security status in the province.

- Failure to establish the Stock Exchange in Basra.

- Banks in the private sector do not issue annual publications to show assets, liabilities, profits and losses; which results in

mistrust by the public.

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Iraq

Basra Province Map

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16

The Private Agricultural Sector in Basra

Summary:

Since ancient times, Basra has been an agricultural area where palm trees, fruits and vegetables are planted. It has a large amount

of livestock and ample fish inventories by virtue of its fertile soil and large volume of fresh water from the Tigris, Euphrates, Shatt Al-

Arab, and Karun. However, it has been totally ignored during the past decades due to war and bad economic policies. The water from the

Tigris and Euphrates rivers has been depleted due to several irrigation projects implemented by Turkey and Syria. The Iranian Karun

river flow was also affected due to Iran changing its stream. Water provided to Basra from other Iraqi provinces is of a low volume due

to the absence of just and fair water distribution by the government. Several procedures were proposed, including an electronic system to

manage water distribution schedules all over Iraq. The proposal includes setting censors to capture the differences of water share

distribution. Moreover, a mobile (sinking) dam can be built especially on Shatt Al-Arab in a location nearby Abu Khseib or to the north

of it on both the Eastern and Western (Iraqi) banks in order to increase the levels of water by 3-4 meters at least. This will help restore

and revive the plant, animal, and fish populations in the river basin. It will help control the waste of water which is currently being

thrown into the sea. Of course, this requires a man-made water stream to be created and building a group of water channels that help

carry fresh water to the land in the south to Al-Faw, where the river basin will be filled with saline water south of the proposed dam.

There will also be canals for water filtration and current irrigation methods which depend on tides will be abandoned and replaced with

drip irrigation systems.

The second major problem is that of scattered agricultural land due to inheritance issues. This results in many owners who are unable to

manage the land, and unable to hold farmers on the land accountable for production. Therefore, the Ministry of Finance must hold acquisition of these

pieces of land and pay good amounts for them to the owners. They must put them up for lease to investment companies; which will set them for large

scale economic production.

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Introduction:

Since ancient times, Basra has been an agricultural area where palm trees, fruit, cereals, and vegetables are planted. The economy

of Basra was basically an economy of agriculture by virtue of the ample palm forests which have the competitive advantage of

temperature and humidity; which helps dates to ripe early.

Basra is also known for planting tomatoes in large quantities in winter; which supplies the tomato demands of other Iraqi

provinces. It also produces other types of vegetables and field crops such as wheat and barley. Studying the agricultural status in Basra

requires knowledge of production process attributes including the following:

First: Attributes of the Agricultural Sector in Basra:

1- Land:

In order to explore the variation of land in Basra and its impact on the agricultural process, we need to know some details

about the nature of soil types available in the province and their suitability for the plant production outputs or to service the animal

production of all types.

Basra surface extends from the southern part of the sediment plateau and the southern part of the western mountain. The

sediment plateau occupies the eastern part of the province and extends on a space of 9,010 square meters; 47.25% of its total space

which is 19,070 square meters.

The land slopes from the north to the south due to the different and varied quantities of sediments from one place to

another. In the northern parts of the province, the altitude of land reaches about 4.5 meters to become less than 0.5 meter in the

southern parts. In this part with the varied heights, the major and greatest part of the human activities in concentrated in Basra.

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The other part of the surface comprises the western hill land which extends from the western part of the province with a

space of 10,059 square kilometers; 52.75% of total space of the province. The level of land heightens gradually when going to the

west; it reaches 12 meters in AzZubeir area and 250 meters near the political borders with the Kingdom of Saudi Arabia.

There are several low points of land in these valleys as is the case in Safwan, Rmeileh, Jweibdeh, and Rafdiyah where a

group of sloping valleys such as Lweiheth and Mweilhat are found (with the largest one being Wadi Al-Baten). There are some

heights such as Jabal Sinam 4 kilometers to the west of Safwan City and 153 meters above sea level.

These valleys are considered the main agricultural areas of Basra province due to the flow and deposit of rain water in

addition to a fair amount of mud and alluvial. This has contributed to the advancement of agriculture there, especially tomato

production.

Water covers 2,000 square kilometers of the province in the form of marshes. However, these spaces have significantly

reduced to 1,267 square kilometers because the State dried 733 square kilometers as they announced at that time in order to expand

the agricultural space. However, this action has resulted in negative environmental impact.

2- Water:

Sources of Water in Basra comprise of:

a. Surface Water

b. Ground Water

Rain does not quantify importantly here as it is estimated at two millimeters per year as per the figures issued by the

Meteorology Department at Basra International Airport. Thus, the two major factors that affect the agricultural issue are surface

and ground water as follows:

a- Surface Water: It includes a group of rivers:

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- Tigris River: Reaching from Misan province to Basra from the north, it is 47 kilometers long; with 24 rivers deriving

from it. As fertile soil and water sources are available there, people have settled along the river.

- Euphrates River: The Euphrates River enters the province from the north west; it is 38 kilometers long and 121 rivers

derive from it in Al-Qurnah and Al-Madinah districts with 38 settlement centers concentrating there due to the availability

of water and fertile soil.

- Shatt Al-Arab: The Shatt Al-Arab is about 95 kilometers long and stretches from Al-Qurnah to the Arabian Gulf; from

its right bank, several streams derive such as Al-Khoura, Sraji, Mheijran, Hamdan and Abu Al-Khasib in addition to

Karun Tributary which stems from Iran and flows into Al-Muhammara (Khurmshaher). However, up to date

developments include some changes, such as Iran establishing a control point on Karun which transformed it to a stream

in Hamshir in Iran. Salinity in Shatt AlArab is of a high level due to the fact that it is geographically lower compared to

the high level of the Arabian Gulf water.

- Shatt Al-Basra: It extends to the west from Shatt Al-Arab and it starts from Harir Village; it joins Karmet Ali River to the

north and ends with AzZubeir Khor. It is 42 kilometers long. Through it, the water of Al-Hammar Marsh directly flows to

the Arabian Gulf. Shatt Al-Basra water has high salinity due to drainage and filtration, making it unsuitable for

agricultural purposes.

- Al-Izz River: It was created in 1993. It is 32 kilometers long and extends to the western side (Tigris) then it flows into the

Euphrates 1 kilometer to the west of Al-Qurnah. It was used in drying water from the Marshes.

- AlMassab Al’Am River (General Flow River): It was finished in 1992. It borders the western route of the Euphrates

until it converges with Shatt Al-Basra at four kilometers to the south of Harir Village. It is 5.2 kilometers long and is

utilized to dispose of filtered water away from marshes and rivers into the Gulf.

- Marshes and Ponds: Al-Hweizah Marsh and Al-Hammar Marsh occupy wide spaces and vary in terms of floods,

drought, and drying.

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The water system in Basra was exposed to a large defect especially in the recent years due to the decreasing quantity of

water coming from Tigris and Euphrates from their origin in Turkey because of the KEPAN dam, the group of Ataturk

dams and the Syrian project at AlTabaqa Dam. Turkey and Syria did not observe the international law in this respect. It is

a hard situation for Iraq as it does not have an international agreement with Turkey to regulate their water sharing given

the fact that Iraq possesses, by nature, the largest basins of the Tigris and the Euphrates; which must secure its needs. This

has resulted in harm to irrigation done by the natural flow of water in Basra on the Tigris and Shatt Al-Arab. Therefore,

there is an increased need to secure artificial methods to provide water.

b- Ground Water:

Ground water is essential to the western part of the province, where it is the main agricultural input. Surface and artisan

wells are being constructed, and locations are being developed to attract farmers capable of exercising agricultural activities. The

geological formations of the area from rubble and sand sediments have helped water pool on the surface layers. This can be kept

in ground reservoirs to be used later on in spite of its high degree of salinity and varied quantity.

3- Human Resources Working in Agriculture

Basra population varies in their distribution from one area to another. According to the statistics of the Public Distribution

System (PDS), Basra and AzZubeir represent the largest concentrations of the population. However, relative distribution varies as

Basra is the area with the largest population density. Al-Faw ranks last in this respect due to several reasons including the

complete destruction of Al-Faw city during the Iraqi-Iranian war. Then, some of the city facilities and governmental departments

were reconstructed and people started to come to the city. These new arrivals are engaged in fish and fishing businesses around

the sea.

Population distribution between rural and urban areas shows that the largest number of rural population is concentrated in

Al-Qurnah, Al-Madinah, AzZubeir, and Shatt Al-Arab, respectively. The other areas in Basra are considered urban areas in

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general. The rate of rural population there is low. Even the Abu Al-Khseib which used to be known as a rural area has recently

developed urban aspects emerging in it with people shifting to urban activities. They prefer these to the rural activities due to

instability and the low living standards except in very rare cases such as tomato growing in the western area of Basra, even

though this is incurring losses as well.

Table (1)

Distribution by Size and Percentage for Basra Province Population for 2007

Administrative Units Population Size %

Basra District 7518731 55.5

Shatt Al-Arab District 757338 4.2

Abu Al-Khseib 735357 6.1

Al-Faw 57315 1.26

Al-Qurnah 718733 7.1

AzZubeir 355333 16.1

Al-Madinah 753135 9.5

Total (for Province) 7383333 755

Source: The Local Government Project in Basra, Comprehensive Economic Survey for Basra Province for 2007

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Table (2)

Total Distribution of Basra Province Population for 2007

District

% of Total Province Population

Urban Rural % of Population Urban/Rural

Basra District 45.5 4.4 9.69

Shatt Al-Arab District 4.00 1.4 53

Abu Al-Khseib 7.8 0.6 7.69

Al-Faw 0.8 0.1 12.5

Al-Qurnah 4.6 5.5 119.5

AzZubeir 11.5 5.7 49.5

Al-Madinah 4.3 3.9 90.6

Total (for Province) 78.4 21.6 27.55

Source: The Local Government Project in Basra, the Comprehensive Economic Survey for Basra Province for 2007

4. Plant and Animal Production in Basra

a- Dates: Basra province is known, on the local, regional and international levels, for growing palm trees, which produce dates.

However wars, embargoes, and shortages of water have all caused palm planting areas to shrink from 161,860 dunums (about

156 square miles) in 1980 to 75,000 dunums in 2000 (about 72 square miles). The numbers of palm trees and the productivity

of dates have also decreased. In 2006, palm trees in Basra counted only for 1.1 million compared with 12 million palm trees in

1980. Accordingly, Basra ranks now the fifth after Baghdad, Diala, Babil and Karbala in number of palm trees. Production of

dates in Shatt Al-Arab area which is the central area for the palm trees forests” decreased from 85 thousand tons in 1980 to

about 22 thousand tons in 2006. This was accompanied by deterioration in the productivity of dates per palm tree which

ranged between 21.8 kilograms at its highest in 2000 and 13 kilograms at its lowest in 1980. This applies to other areas where

the palm fields are found including marshes, and the southern Tigris. In general, average production of a fruitful palm tree in

Basra counted for 56 kilograms compared with 60 kilograms in Baghdad, 65 kilograms in Al-Anbar, 69 kilograms in

SalahEddin, and 80 kilograms in Waset.

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Table (3)

Spaces planted with Palm Trees and their Numbers in Shatt Al-Arab (Basra from Karmat Ali till the flow into the Gulf) during

1980-2006

Year Planted Space/ 1000 dunums

Number of Palm

Trees (million) Production

(1000 tons) Palm Tree

Productivity

(Kgm)

7885 753 5.6 83 75

7887 755 4.2 37.8 15.75

7885 78 1.6 25.2 15.75

7887 35 1.5 28.3 18.8

7555 58 1.2 26.2 21.8

7557 57 1.1 21.7 19.7

Table (4)

Spaces Planted with Palm Trees; their Numbers and Production in Al-Madina, Hweir, and Talha Areas during 1980-2006

Year Planted Space/ Dunum Number of Palm

Trees

(Thousand)

Production

(Ton) Production per

Tree (Kgm)

7885 75771 373 8735 15.7

7887 77355 313 3755 8.8

7885 75355 573 7135 8.5

7887 75555 555 5735 12.1

7555 875 783 5773 10.19

7557 8775 773 7755 9.7

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Source: Department of Agriculture in Basra

Table (5)

Spaces Planted with Palm Trees; Their Numbers, and Production in Southern Tigris Area (Al-Qurna, AdDeir, AnNashwa, and

Al-Hartha) During 1980-2006

Year Planted Space/ Dunum Number of Palm

Trees (Thousand) Production

(Ton) Production per

Tree (Kgm)

7885 75355 755 8555 73

7887 77755 385 5355 3.3

7885 8555 553 3555 13.2

7887 8755 783 3535 14.2

7555 1355 785 7135 9.8

7557 1555 753 7135 7.4

Table (6)

A Time Comparison for the Palm Tree productivity in Basra Areas

1980-2006

Year Relative Change of Productivity

between the Comparison Year and

the Base Line in Shatt Al-Arab %

Relative Change in

the Marshes % Relative Change in

Southern Tigris %

ـ ـ ـ 7885

7887 77 (35) (18)

(77) (33) ـ 7885

7887 44.6 (22.9) (3)

7555 67.6 (53) (53)

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7557 51.5 (58) (757)

Sources: Department of Agriculture of Basra

Note: the Base Year is 1980 and the Comparison Year 2006.

Numbers between brackets are minus numbers

b- Tomato Production: Tomato growing was spread in the western desert area in Basra especially during winter using “plastic

tunnels”. The 2005-2006 agricultural seasons marked a noticeable increase in the tomato productivity. However, compared

with international rates, this rate is still low as studies reveal that the productivity of one dunum of land equals 10-12 tons.

This is for several reasons including: absence of agricultural extension, salinity of water, shortage in mesh (plastic covers) and

the high prices of these inputs. The government used to supply these items; but the state owned Petrochemical Factory has

stopped producing them. Fierce competition with neighboring countries has also contributed to the problem.

c- Cereals: Production of cereals (wheat and barley) in Basra is a family business rather than a commercial one. It is true that

Basra used to produce these cereals, especially barley, because they are suitable to Basra‟s muddy, heavy, relatively saline soil

yet, production quantities dropped to very low levels until they reached 16,960 tons of wheat for the 2005-2006 season

compared to 14,469 tons for the 2001-2002 season, a difference of only 17% and still a very low quantity.

Table (7)

Planted Spaces and Quantities of the Tomato Crop in Basra

During 2000-2006

Agricultural

Season Planted Space

(Dunum)

Produced

Quantities

(Ton)

Average

Production

(Ton)

Development of

the Agricultural

Unit Production

(%)

7557ـ7555 ــ 4.2 773785 58185

7557ـ7557 37555 715785 4.1 -(2.3)

7555ـ7557 33575 757555 4.2 0

7553ـ7555 ــ ــــ ـــ 35735

7553ـ7553 38555 773775 4.4 4.76

26

7557ـ7553 33385 783755 5.3 26.1

Source: Department of Agriculture in Basra

d- Red and White Meats

Most of the meat needs of the consumer in Basra are being covered now through importing frozen or packaged red and white

meats (poultry) from neighboring countries. Although there is local production of sheep and other livestock, it does not fulfill

all the demand. Locally grown livestock are more expensive and cannot compete with prices of imported goods. On both the

national and provincial level, there are no statistics available on slaughtered animals including sheep, cows, and poultry. If

available, such statistics do not represent the factual status in Basra. Therefore, they are not used here.

e- Honey

There are no statistics available on the production of honey at the bee farms which are still family businesses. However,

everybody knows that this food industry has expanded horizontally. More people are acquiring further knowledge and

information necessary to keep bees. Natural honey is produced in orchards or plant nurseries in Basra; specific types of honey

are produced including Zizyphus Spina Christi. However, numbers are not available about the production.

Second: Core Partners

1. Farmer Cooperatives and Dates Presses

2. Palm growers

3. Agricultural Engineers‟ Association

4. Teaching Staff and Scholar Researchers

5. Livestock keepers

6. Fishermen Association

7. Fish Keepers (Fish and Shrimp Plantations)

8. Association of Bee Keepers in Basra

9. Association of Tomato Growers in AzZubeir

10. Businessmen Union in Basra

11. Center of the South to Develop the Iraqi Economy

Third: Challenges and Proposed Solutions:

Challenge: Problems of low production and marketing of the tomato crop in the western part of Basra.

Objective: Provide continuous production of tomatoes all year (supply outweighs demand)

27

Background: 1. Low levels of ground water.

2. Soil in Safwan, AzZubeir Rmeileh is of poor quality; it needs to be continuously enhanced with both organic and chemical

fertilizers.

3. High costs of production inputs including mesh, fertilizers and seeds.

4. Spread of some diseases and the poor level of integrated pesticide system.

5. Low temperatures in winter; which causes harm to the produce. Green houses must be provided to replace the “plastic

tunnels” used now.

6. Problems of poor marketing of locally produced tomatoes during peak production compared with a large scale marketing of

imported produce, which has resulted in dumping the market with imported tomatoes especially from Syria and Iran.

7. Most often, planting tomatoes takes place in winter; which results in about 6,000 fields growing tomatoes simultaneously in

this area.

8. There are no manufacturing plants to produce tomato paste.

9. Increasing salinity of ground irrigation water which causes harm to the produce and decreases production and productivity.

Proposed Solutions

1. Build an irrigation canal to pull water from Shatt Al-Arab (despite its increasing

salinity) to provide areas irrigated from wells to increase the level of water and

fulfill the increasing requirements of agricultural inputs.

2. Shift to use state of art technologies in agriculture and promote green houses to

avoid bad weather conditions, insects, and rodents. Also, promote competitiveness

between the public and private sectors or within the private sector itself in terms

of well digging and irrigation technologies.

- Ministry of Water Resources - Ministry of Agriculture

- Ministry of Science and Technology

28

3. Encourage the local and foreign private sector to invest and indulge this

agricultural area to provide relevant production and automation services.

4. Encourage the establishment of manufacturing plants for tomato paste in Basra 5. Urge university agricultural departments to undertake research and extension role

as relevant for farmers. 6. Provide and expand the scale of agricultural bank lending.

- Ministry of Trade

- Basra Investment Commission - Department of Agriculture in Basra

- The Agricultural Bank

- Basra Provincial Council

Challenge: Problems related to the decreasing number of palm trees and their productivity

Objective: Increase spaces cultivated with palm trees; and improve productivity of the palm tree.

Background:

1- Productivity of a palm tree decreased to fewer than 25 kilograms and shortage in numbers of palm trees remaining in Basra.

2- Shrinking agricultural space for farmland as some ministries such as the Ministries of Oil, Defense, or Tourism prohibit farmers

from planting on some land

3- There are large spaces planted with landmines left over from the Iraqi-Iranian war.

4- The spread of palm diseases (the Dubas Insect), Erysiphales (powdery mildew)…etc.

5- Spread of conflicts over ownership among owners of palm fields due to fragmented ownership due to inheritance; also, there is no

single agency to direct production, resulting in low production.

6- Salinity of water of Shatt Al-Arab, low levels of water in the Tigris and Euphrates, and the increased salinity to the north of Al-Faw

until Al-Ma‟amer-Fadaghieh, which has negatively affected the nutrition needed by palm trees to improve their productivity.

7- The increase in insects that have a negative impact on the growth and productivity of palm trees.

8- The dates pressing industry is still lagging behind and its inputs are not available in Basra.

9- The poor level of exportation in general; when it comes to dates, no exportation is available due to the fact that these dates are not

competitive let alone the complicated procedures to export and open markets for Basra‟s dates.

10- Industrialists in Basra are not willing to establish food manufacturing industries that depend on dates such as molasses, vinegar, and

animal fodder (from the dates flesh or pit).

11- The phenomenon of population relocation and selling land to those speculating in the real estate market is spreading.

29

Proposed Solutions Competent Authorities

1. Compensate farmers for the harms they were exposed to due to the policies of the former regime

(landmines, expulsion, and desertification). 2. Solve ownership and ownership fragmentation problems resulting from inheritance. These problems can be

solved by investing these spaces for large agricultural projects in line with the relevant legal framework.

3. Combat pests according to scientific methods to get rid from palm diseases. 4. Control random construction of housing units on fields. 5. Deliver health, cultural and education services to the rural population. 6. Have the Agricultural Bank lend real farmers in the cultivated land and not only owners of fields. 7. Develop plantation of palm trees using certain methods such as (tissue culture) which helps maintain

species economically in demand and reduce time required. Its results can be scientifically predicted

compared to the traditional method of using shoots or seedlings. 8. Conduct joint studies with the Ministry of Water Resources to overcome water salinity in Shatt Al-Arab as

well as the low levels of Tigris and Euphrates using modern irrigation methods. If necessary, these can

include provision of a mobile sinking censor at Shatt Al-Arab (the two Iraqi banks to the north of Abu Al-

Khasib). This is aimed at increasing the fresh water levels and reducing unaccounted for water quantities of

the sea in line with the tide movement and with Basra shore. Also, revisit the mechanisms of the operation

of Basra shore in draining the filtration water into the sea without causing any damage to the irrigation

water in Basra. This requires technical studies to be conducted by competent agencies. 9. Open canals in different areas of Shatt Al-Arab basin to provide irrigation water for palm trees which are

still dependent on surface water flow.

10. Restore the activity of growing palm trees in Chalamchah, and Uqba bin Ghazwan and areas alongside the

eastern part of Shatt Al-Arab till Al-Qurnah being a relevant area for such a produce.

- The Cabinet

- Ministry of Defense

- Ministry of Agriculture - Ministry of Environment

- Ministry of Water Resources

- Ministry of Science and

Technology

- Scientific Research Institutions

including relevant universities,

and consultancy offices in

Basra - Basra Investment Commission

- Department of Agriculture of

Basra - The Agricultural Bank

- Basra Provincial Council

Challenge: Problems: related to the low production of cereals and oil crops in Basra.

Objective: Increase the production of cereals according to the space of cultivable land and the production inputs available.

Background: The low production of cereals and oil products (family projects).

31


1. This type of production requires further agricultural companies to be established.

2. Conduct thorough scientific research in cooperation with scientific institutions to develop species

resistant to salinity and desertification. 3. Encourage the private sector to establish and operate large agricultural companies to grow cereals

including shareholding companies to provide capitals required for a large scale production.

4. Create one effective agency to coordinate provision of agricultural appliances including drip and

spray irrigation systems to overcome the problem of water scarcity. 5. Provide further flexibility for the agricultural bank according to a well considered plan for

agricultural lending.

- Department of Agriculture of

Basra - Ministry of Science and

Technology

- Scientific Research Institutions - Ministry of Trade - Private Sector companies and

businessmen)

- The Agricultural Bank

Challenge: The poor quality and quantity of summer and winter vegetable production.

Objective: Increase the quantity and quality of the local product of vegetables to achieve self satisfaction and surplus for export.

Background: 1. Growing vegetables is still limited in Basra although they are important to the consumer from a nutrition and economic

perspective. Vegetables, including winter and summer production, do not exceed 10% of total cultivatable land.

2. Most of the irrigation activity depends on surface water flow and full irrigation of streams; which results in problems of saline

soil and shortage of water due to lack of fuel.

3. The local producer is incapable of competing with the foreign importation from neighboring countries for competitive prices and

excellent qualities.

4. Land cultivated with vegetables are fields with limited spaces and most often this land is problematic due to the fragmented

ownership due to inheritance or because owners abandon it because of low revenue from those who work on it.

5. The majority of agricultural projects are limited to family businesses.

6. Several fields cultivated with vegetables in surrounding area of Al-Mutiha for instance suffer from high salinity; which has

resulted in reduced production potentials. However, vegetables cultivated in AnNashwa area yield a larger product due to the

low salinity of water there.

7. Shatt Al-Arab water in general is pollute and the land of Abu Al-Khasib, and areas neighboring Shatt Al-Arab are polluted with

the oil wastes due to the use of boats and ships for fuel or due to the smuggling processes of oil products through Shatt Al-Arab.

In all cases, this affects the nutrition of vegetables which yield a low product.

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Proposed Solution

1. Motivate farmers to use modern irrigation methods depending on sprayers and drippers in order to reduce soil

salinity, water waste and shortage of fuel for pumps.

2. Use green houses to avoid damage from bad weather 3. Provide banking facilities and production inputs under a strict control system to ensure that only the eligible

agencies will receive such assistance and prevent abuse thereof by the trade sector or on the black market. 4. Encourage the commercial and productive sector in general to establish agricultural companies as integrated

projects that observe the agricultural cycle to reduce costs and increase the local product supply. 5. Protect the environment of Shatt Al-Arab from increasing pollution. 6. Control smuggling operations through rivers by providing police forces and border guards. 7. Conduct thorough technical studies on the salinity phenomenon resulting from filtration and suggest possible

solutions. 8. Use ground water in the western parts of Basra to grow vegetables especially in AlLahis area which is known

for growing certain crops such as cucumber, onions, garlic, water melon, and melon.

Competent Authorities

Ministry of Agriculture Ministry of Science and

Technology Ministry of Trade

Ministry of Water Resources Basra Investment Commission

The Agricultural Bank Ministry of Environment

Ministry of Interior Provincial Council of Basra

Department of Agriculture of

Basra

- Animal Production 1. Meat of all types

2. Bee hives for honey production

(1) Meat is an important source of protein and is necessary for humans and can be provided from one of the following sources:

a. Red meat (from buffalo, cows, camels, sheep and goats)

Challenge: Problems related to keeping calves and cows

Objective: Develop projects with economies of scale in livestock production

Background: 1. Problems of keeping calves partly due to a lack of proper sized pens, and required services such as electricity, fresh water,

and veterinary services.

2. Standard fodder ratios are not available and if available, they are very expensive and are not subsidized by the State (the

State provides 200 kilograms of bran for livestock keepers for a subsidized price but after obtaining approvals of 10

ministries or other agencies. It is a long process of red tape).

3. Licenses for fields to keep livestock legally require 20 dunums of land and approvals from 16 ministries or local agencies;

in reality such spaces are not available for many people.

32

4. Some species of cows that can produce milk and meat are not used; reliance is on the local species with the low

productivity.

Proposed solutions Competent Authorities

1. Encourage investors in accordance with the 2006 Investment Law No. (13)

2. Assist the private sector to qualify model cow pens as a research and productive target. 3. Provide the required facilities to identify the spaces of fields to keep calves and cows to issue licenses to a

larger number of investors. 4. Import species of high productivity of mother cows to increase the production of red meat and increase the

production of milk. 5. Introduce a set of integrated banking, health, and legal procedures that several responsible ministries

(engaged in agricultural and livestock domain) participate in drafting.

Ministry of Agriculture Basra Investment Commission Department of Agriculture of

Basra Ministry of Finance

Challenge: Keeping Buffalo

Objective: Increase the number of this buffaloes settling in the central area and in the southern part of Iraq; which is known for high

productivity and a product rich with fats and ghee elements.

Background:

1. The environment for buffalo is available in the marshes and ponds; but a large portion of this land was harmed due to the

policies of the former regime.

2. Indigenous and migrating diseases and epidemics affect the numbers available of this animal. These animals could have been

slaughtered and provided as table meat instead of keeping them only as movable assets that produce milk.

3. The lack of buffalo owner awareness as relates to nutrition and veterinary issues due to the risky security status in the areas

where buffalo is kept. Most of these areas are socially closed.

4. Some of the governmental agencies in the province provide an alternative environment near Shatt Al-Arab and Shatt Basra to be

used by buffalo keepers; these are agricultural areas. Therefore, dual problems are being faced with the farmers or fish keepers

in the basins as the buffalo is a heavy animal and destroys the environment. It is better to provide a space for this animal that is

more relevant to its genuine environment.

33


1. Develop banking facilities (although the Cabinet approved of an advance payment of ID 250

million to establish pens to keep 50 buffaloes or more it is still in need for a package of legal,

administrative and technical procedures to be enforced).

2. Public private partnerships to establish pens to keep buffaloes for scientific and qualitative

development; they might even produce breeds that are more resistant and more productive. 3. The method of dyes and numbering must be used to count animals by the agricultural departments

in a manner that does not cause any harm to the animal. This is aimed at identifying the health

problems that affect the life of this animal; also to identify the violation and legal fraud cases as

well as decisions including lending.

4. Assist in building artificial pools under contracts from the state for a relevant rental fee to help

increase the number of these animals. 5. Develop marshes to resettle the displaced buffalo; this development includes a provision of living

inputs along with electricity, potable water, and health care in order to achieve socio-economic

stability.

Departments of Agriculture, Health

Protection, and Veterinary in Basra

Ministry of Science and Technology

Ministry of Interior and Public Security

Forces which must intervene in some of

the remote areas.

Basra Investment Commission

Provincial Council of Basra

The Agricultural Bank

Challenge: The low number of sheep heads

Objective: Develop this animal species as it is widely in demand inside and outside Iraq

Background: 1. The number of male goats is seriously decreasing due to the high demand for baby goats and slaughtering them during the past

years especially outside formally managed slaughterhouses; and these are smuggled outside Iraq.

2. The low level of care provided for ewes to help them reproduce or resist miscarriage that they face due to weather conditions and

epidemics that mothers and the litter suffer from.

3. Applying methods to replace ewes in supply with goats without alerting the consumer is another issue causing harm to the

consumer.

4. The lack of an integrated commercial policy that covers exports of livestock (sheep and others) to the neighboring countries.

5. Settling diseases or epidemics are killing the sheep and no decisive and effective action/reaction is being taken.

6. There are no pastures especially allocated for sheep due to the shortage in cultivated land all over the province.

34

Proposed Solutions

1. Encourage scholarly research and establish pens to keep sheep; also participate in producing

breeds that are more resistant to disease especially those seen as settling diseases.

2. Implement a realistic commercial policy based on imposing relevant exportation fees as per

a fixed quota for the number of Iraqi sheep. This will help provide a good yield to export

sheep that are being smuggled using all methods due to the high demand outside Iraq.

3. Apply a veterinary and nutritional package of procedures to help sheep keepers increase

numbers of sheep heads. 4. Encourage growing of the jute crop being a rich feed source for sheep and due to its

importance in solving the problem of high salinity of agricultural land.

Competent Authorities

Ministry of Agriculture Ministry of Trade Ministry of Health Ministry of Finance

b. White meat (Poultry and Fish)

Challenge: Problems of keeping poultry

Objective: Increase the supply of white meat and table eggs

Background: 1. The state-owned large poultry farms were abolished and no suitable alternative has been established so far.

2. The Law of Investment has not been supported with tangible enforcement procedures.

3. Poultry keeping is still in need for an integrated package of nutritional, health, and marketing procedures that must be

implemented through a partnership between the public and private sectors.

4. There are no feed (fodder) factories in Basra till now; the administrative procedures require several and multiple

approvals to release the advance payment of ID 150 million. It requires the project to be completed before getting the

advance payment; which means that, most often, businessmen are unable to implement a project.

5. The marketing competitive status of poultry and table eggs industry is irrelevant at present in Basra as the products of

Brazil, Saudi Arabia, Kuwait and Syria are less costly due to the subsidy policies provided for production and prices.

6. The lack of power supply needed for poultry barracks especially in the hot summer of Basra.

35


1. Set integrated production policies to promote investment in poultry industries (hatchers, fields,

fodder factories, slaughterhouses, and refrigerated storage). 2. Direct subsidy to those entitled to it of producers instead of subsidizing prices as the infrastructure

for keeping poultry is not available at present.

3. Encourage the local product and increase its competitiveness and marketing mechanisms. 4. Provide power supply needed for poultry barracks especially in summer.

Ministry of Agriculture

Ministry of Trade

Ministry of Industry



Department of Agriculture of Basra


Fish: Challenge: Problems of fishing river and sea fish

Objective: Develop fishing to cope with the increasing local demand.

Background: 1. The high salinity degree of river water due to the filtration processes taking place there and the increasing saline space; which

biologically affects the life cycle of traditional river creatures and river fish and their quantities.

2. The already low quantities of fuel (gas and oil) provided for fishermen have been cut off due to the smuggling incidences taking

advantage of the difference between local and international prices.

3. Methods of overly fishing using small nets; fishing during the reproduction season; or the use of insecticides, poisons, and

explosives under these methods.

4. The shores of Iraq along Kuwait and Iran are of a short length; they are so rich with sea creatures.

5. Iraqi fishermen are exposed to the risk of being shot by the authorities at the Kuwaiti and Iranian coasts due to the fact that no

fishing agreements have been signed with these two countries.

6. Problems of local marketing due to the high prices of ice in summer and the power supply cut offs causing the fish to rot quickly;

which results in low supply.

7. Prices of imported fish are low compared to local fish prices; which weakens competitiveness.

8. Iraqi fishermen sell sea fish to the neighboring countries due to the difference of exchange rates.

36


1. The competent departments of agriculture must supervise the fishing process and guide the fishermen in terms of

methods and timings relevant for fishing from the legal perspective to protect and sustain the fish population. 2. Incidences of illegal fishing must be referred to the public security forces, the border forces, and the river police.

Reports must be written to identify penalties and refer those who violate the laws to the competent courts.

3. The state must provide fuel to help operate the boats; and effective procedures and controls must be imposed on those

who violate. 4. The Iraqi official departments- federal or local government units must seek to conclude agreements for fishing in the

sea and controlling it in a manner that serves all parties.

5. The Iraqi private sector must be encouraged to possess large ships on a large investment scale to fish in the free

international water (high seas). This must be put into the right legal framework. The Law of Seas must be inspired in

this respect for such economic ships can be mobile factories that can provide freezing, cleaning, and packaging

processes. Then marketing can be done. This was the case when the governmental fishing fleets were in existence. It

can be restored and developed with an effective contribution by the private sector.

Department of Agriculture of

Basra

Ministry of Interior and Border

Forces

The Commission to Allocate

Oil Products in Basra

Ministry of Foreign Affairs


Investment Commission of

Basra

Economic Organizations and

Business Associations in Basra

Fish Keeping and Plantation in Basins and Cages:

Challenge: The productive activity of fish and shrimps cannot cope with the increasing local and national demand by the consumer.

Background: 1. The legal framework for fish keeping is derived from the Law of Controlling Fishing and Exploiting Aqua Creatures No. (48)

from 1976 and the Regulations of the Ministry of Agriculture No. (100) from 1985 which identify the space of a fish farm at 10

dunums minimum with an aqua surface of 5 dunums. The law and regulations rule the contracting process for the fish keepers of

non-cultivatable land and upon obtaining a series of approvals from the competent agencies.

2. The emerging developments have not been counted for to organize the relation with the contractual parties.

3. Cultivatability of land has changed and the current laws have failed to provide a mechanism for a new practical classification of

land whether it is agricultural or for fish keeping.

4. Qualitative and quantitative changes in the river water in Basra are not relevant for the indigenous species; they are relevant for

the breed species, though.

5. There is no mechanism to help a fish keeper obtain a water share for the fish basin according to technical standards.

6. Producers of new products especially shrimps are still in need for direction and support.

37

7. The need is still there for a well considered direction to exploit the sea water to produce sea fish such as “Zbeidi” and Shank.


1. Develop and enact new laws to rule the fish keeping industry and aqua species to provide for planting

these creatures in smaller spaces to help increase their supply.

2. Make use of the Law of Investment to the largest extent possible to develop this activity in the

agricultural sector. 3. Reduce the red tape of the unnecessary procedures and apply the method of the “one-stop” shop. 4. Think tank institutions must participate in at least developing species and breeds of fish and shrimps.

5. Introduce keeping sea or river fish in cages to reduce the space of a farm and increase productivity. 6. Develop marketing through standardized filling and packaging and observe consumer protection

standards to provide a permanent market for the Iraqi producer. 7. Promote the local production by marketing technologies and mechanisms and improve its

competitiveness without any safeguards that make the private sector depend again on the state to

dominate the local market on the account of quality and the consumer.


Ministry of Water Resources

Ministry of Environment

Investment Commission of Basra

Think tank institutions in Basra

Ministry of Trade

The Private Sector

Bee Hives to Produce Honey Challenge: Difficulties in bee keeping

Background:

1. Bees are kept in family projects that rely on inherited experience for the previous generation.

2. The dimensions set for the bee hive are 3kilometers for each hive with 10 frames

3. There is not industry to produce hive frames in Basra. They are imported or manufactured in the Central Euphrates provinces

which are known for their dense vegetation cover compared to Basra.

4. Insecticides harm bees most of the time due the lack of required coordination.

5. The low vegetation cover in the area causes harm to this important food industry.

38


1. Encourage farmers and peasants to keep bees as it is one part of the agricultural cycle; it should not be limited to

gardens. It should rather spread into fields as well. 2. Encourage the industry of honey with all its physical inputs including frames of hives. 3. Provide medicines and combat insects that cause harm to bees using spiders or birds (Abu Al-Khdeir bird)

4. Avoid the sugar solution to feed bees for the sake of producing honey. A sugar solution is used only to sustain the

bees in winter when the feed needed for them is of a low quantity. 5. Have the administrative organs disburse the advances (ID 7 million) allocated to help bee keepers away from the

complicated and long red tape.

6. The metrology and specification agencies must intervene to re-assess the product of registered bee keepers and

those who are members in the bee keepers‟ associations. A certificate is to be given to qualify the produce

conforming to specifications to be exhibited on markets. The impure produce must be dismissed from the market

and consumers must be protected from fraud. 7. Issue a certificate will help qualify the Iraqi produce and from Basra (Zizyphus Spina Christi) honey used for

healing purposes in order to open foreign markets for this product.



Ministry of Trade

The Agricultural Bank

The Central Institute for

Metrology and Quality

Assurance

Health Control

Department in Basra

Fourth: Challenges and Aspirations It has become obvious that Agriculture is an important component of productive sectors for any country especially Iraq which has this

natural endowment of climate and geographic diversity and typography. In the past, it used to be an agricultural country. However, this

has not been the case for the past few decades. It has become an importer of many of its needs and requirements. Basra used to be an

agricultural area full of palm and fruit fields and orchards in addition to cereals and vegetables of all type. However, the plant and

animal production has deteriorated for many reasons including the following:

1- Cultivated, reclaimed, or cultivatable land in Basra is reducing on a continuous basis due to migration from the rural to the urban

areas or due to the low living standards of farmers, the lack of basic services and unemployment.

39

2- Agricultural irrigation water which runs in Basra and southern Iraq (usually as a surface flow) has decreased due to the

decreasing amount coming from Tigris and Euphrates and Al-Karun. This required increased use of pumps to pull water that

used to run making use of tides. Still, it is an onerous process due to the lack of fuel to operate pumps.

3- Irrigation water from Shatt Al-Arab now has a higher degree of salinity; it increased from 1.2 grams/liter to 2.5 grams/liter. In

the past, water from northern Faw was sufficient to plant the best species of palm. However, things have changed at present due

to further increase of salinity- to 5grams/liter in 2008; then, to about 15grams/liter at the highest tide and 11 grams/liter at the

lowest tide. This means another extension of the saline space from the sea; which has affected nutrition of plants and destroyed

many of them.

4- The large scale environmental pollution which occurred on palm and other plants‟ fields due to oil pollution from Shatt Al-Arab

from boat and motorboats as well as trafficking of oil products through this river exit of the sea.

5- The problems of ownership and agricultural tenures of plots and fields for farmers or farmers contracted by owners to plant the

fields, for which they only receive one third of the crop from the owners. This ends up with the contracted farmer owning one

third of the tree or palm; another intricacy for the agricultural process through generations and decades.

6- Fragmented agricultural ownership due to inheritance has resulted in abandoning large spaces of the agricultural land later on

and dismissing them from the production cycle.

7- A large space of agricultural land has been allocated for the use of oil investments under the Ministry of Oil whether under

current investment or just to be kept for the future. Owners of such land or those who concluded contracts in the past to invest it.

Otherwise, it has been also acquired by other parties such as the Ministry of Defense or that of Antiquities.

8- Large spaces of land are full of landmines left over from the Iranian-Iraqi war still exist and haven‟t been cleared, which reduces

cultivated spaces.

9- The overwhelming majority of land and fields in Shatt Al-Arab District, Wasiliya and Seibah on the Shatt Al-Arab bank were

destroyed during the Iraqi-Iranian war, or is being occupied by the Iraqi armed forces. The original owners have not received any

compensation as was decided in the past. Only one portion was disbursed of this compensation to the account of a limited

number of owners.

10- Production inputs including fertilizers, hybrid seeds and mesh for protecting plants are available in low quantities, causing harm

to the tomato produce in Western Basra.

11- Agricultural yield marketing problems have caused harm to the producers.

12- The lack of trade policies to combat market dumping of some products has resulted in excluding some producers from the

production cycle.

13- Livestock is exposed to epidemics and contagious diseases, resulting in reduced numbers of heads.

14- Over-slaughtering of animals and smuggling of sheep has caused serious harm and decreased livestock numbers to a large

extent.

41

15- The use of explosives and poisonous pesticides in fishing and the use of small fishing nets have significantly reduced fish

numbers.

16- River and sea fishing is expensive due to the high prices of oil derivatives needed to operate boats.

17- There is no effective support to transplant fish and shrimps.

18- The lack of a governmental policy or program to support bee keepers; the only case is a recently allocated advance of ID 7

million.

The Government must set a strategy on the macro level to support this vital sector which is the food basket of Iraq. Basra is known for

growing vital products such as dates, wheat, and vegetables. The agricultural bank must be enforced to provide banking facilities to

farmers; market dumping must be combated; and the Provincial Council must be involved in establishing agricultural companies.

41

42

The Private Industrial Sector in Basra

Summary

The Private Industrial Sector in Basra has low levels and poor quality production. It has failed to cope with international

technological developments and is isolated from these developments due to the randomly set economic policies. The commercial

importation of industrial and other goods has exacerbated the problem and caused the performance of this sector to deteriorate. The

use of automation and technological improvements are poor and only applied to a small number of projects. Funding sources are not

available, marketing niches are rare and importing or otherwise obtaining production inputs is hard due to the costs and multiple

impediments to enter foreign markets. This has all led to an industrial sector that lags behind the rest of the world.

In light of new economic openness and free importation, bad quality, but cheaply priced imported products are entering into the

market. This has negatively affected the private industrial sector. Other factors have also negatively impacted it, including continuous

power supply cutoffs, high and unfair taxation, the lack of industrial loans for capital investment and technological improvement,

high prices of production inputs and the bad quality of those available on the local market, and an obvious absence of municipal

services in the industrial zone. This has resulted in the zone becoming a pond of dirty water and streets becoming unusable. Other

factors include industrial fraud, the Central Institute of Metrology and Quality Assurance‟s lack of effectiveness, and the large

amount of red tape to register a company. As a result, the role of the private industrial sector in economic development and the

development of Basra is totally absent. Its contribution to the Gross Domestic Product (GDP) is low, the technology it uses is

obsolete; industrial products are low quality; and the sector is totally incapable of manufacturing many industrial goods. All these

factors have resulted in further demand for the foreign and imported industrial goods.

Introduction The industrial sector in Iraq has been severely neglected; which resulted in a deteriorated sector with most the private and public

industrial enterprises suspending operation, which paralyzed the industrial sector. The industrial enterprises have been largely

marginalized resulting in depreciation of machines and equipment as the loss of Iraqi capital investment abroad and the significant

brain drain of qualified workers as they look abroad for opportunities.

The Iraqi economy is an economy of rent; it depends on oil revenues to finance the general budget, which has resulted in a distorted

economic structure due to focus on, and concern with, the enterprises of the oil sector and the deliberate negligence of the other

sectors. The industrial sector was exposed to fierce competition and was unable to face it, which turned it into almost a paralyzed

sector in front of the large commercial importation of foreign goods into the Iraqi markets. The inability of industrial enterprises to

43

fulfill the needs of the local market has opened wide the doors for traders to engage in unprecedented importation of bad quality

goods, which again causes negative impacts on the industrial sector and results in low levels of domestic enterprise activity and

development.

Reasons for the low contribution of the industrial sector in total national income include:

i. No development plan is made available for it;

ii. The unstable security status;

iii. The lack of infrastructure required for the advancement of the industrial sector;

iv. Exposure to destruction;

v. Incompetent people are assigned to manage economic sectors;

vi. Administrative red tape;

vii. Economic, financial and administrative corruption;

viii. Uncontrolled importation and poor quality assurance.

The private industrial sector has been deteriorating since the former regime collapse. It has the lowest level of contribution to GDP,

namely, 1.2% in 2007. Most of its projects are concentrated in food manufacturing (381), textiles (388), manufactured metal products

(123), and chemical and plastic products (122).1 These projects are either sole proprietorship or family run projects in terms of

investment, structure, production and marketing. They do not use new technology or modern machines in production. Moreover, they

cannot compete with imported goods. It is noticeable that the transformational industry had a low contribution to the GDP in 2007, only

3.02%, while the oil sector accounted for 55.86%.

1 Ministry of Planning and Development Cooperation, Central Office of Statistics and Information Technology www.cosit.gov.iq

http://www.cosit.gov.iq/

http://www.cosit.gov.iq/

44

Table (1) Relative Significance of Economic Sectors in the Gross Domestic Product (GDP) in Iraq for 2007 in fixed rates (1988)

Economic Sectors Relative

Significance %

1. Agriculture, fishing and forests <6:8 2. Mining and Quarries including: 996=5 Crude Oil 996<: 5. Transformational Industry 56.3 4. Electricity and Water 065. 5. Building and Construction .690 6. Transport and Transportation 0603 7. Wholesale and Retail Trade 563: 8. Money, Insurance, and Real Estate Services .6=; 9. Social development and personal services 39639

Source: Ministry of Planning and Development Cooperation, COSIT

An analysis of the private industrial sector in Iraq reveals a clear vulnerability of this sector which comprises of a large number of small

scale production facilities using fewer than five people and investing less than ID 100,000 in machines and equipment. Statistics reveal

that small enterprises comprise a rate of 96.16% of total industrial enterprises with only 21.75% employment; large enterprises form

only 3.40% with 77.8% employment rate. In addition, one can mention the low level of automation and technology, the small size of

projects and their spaces, the lack of marketing sources and marketing niches, the complex and expensive import process needed to

obtain production inputs. This has resulted in a deteriorated industrial sector that is incapable of coping with international

developments.

The majority of small enterprises are units and factories for non-stereotyped productions; they are more or less similar to small craft

workshops rather than small industrial firms as per the modern concept. The value of Iraqi imports of machines and equipment reached

USD 19.320 billion, while the value of manufactured items reached only USD 7.032 billion in 2005/2006. This can be attributed to old

and obsolete technology used in projects and exposure to destruction, resulting in the majority of industrial firms having low

productivity and turning into a financial burden for the state. These projects have failed to yield the revenues to cover production costs.

45

These companies suffer from the absence of economic controls due to the inflow of poor quality, cheap manufactured items from

different international origins into the country. Therefore, the Government has to provide a financial subsidy of about USD 1.2 billion.

Basra Province includes several manufacturing (transformational) industries that can be classified as follows:

1. Companies of prefab structures and concrete.

2. Factories for the steel, metal, and mechanic industries.

3. Factories for the thermo stone, tile, gypsum, rubble, block and calcareous block industries.

4. Cereal Mills.

5. Manufacturing plants for foodstuff (carbonated drinks, juices, water, sweets and pastries).

6. Ice factories and presses.

Large scale industries are spread outside the province center whilst the small and mid scale industries are concentrated inside Basra

province. Table No. (2) illustrates the total industries in Basra and its percentage to the total industrial sector in Iraq. The table shows

that food manufacturing counts for 17.6% of total industries in Iraq; followed with construction industries- 10.7%; then, furniture

manufacturing- 10%; and manufacturing (transformational) industries- 6.8%.

Table (2) Number of Enterprises of the Private Industrial Sector in Basra Province and their Rate to the Industrial Sector in

Iraq

Industries Basra

Province Total Industrial

Sector Rate of Basra Province to the

rest %

Food Industries 9;; 53:3 0;6:

Construction

Industries 908 8;;: 0.6;

Furniture Industry 308 3050 0.

Transformational

Industry 0:38 35:=9 :6<

TOTAL 3=3= 55<:8 <6:8

46

Source: The Iraqi Center for Investment Studies and Information, Basra, the economic resources available in Basra Province for the

year 2006, Page 69.

Total industrial projects (large, mid and small scale) in Basra province are estimated at 4,636 projects including 767 projects

operating and 45 in suspension. Small scale projects count for the largest rate- 95%; followed with mid scale projects with a rate of

3%; and large scale projects of 2%. Suspended projects count for 40% for large industries; and 28% for mid industries. Those

working in all projects count for 81,895 workers with the large industries employing 94% of total workers and mid scale industries

employing 1.5%. Finally, small-scale industries count for 0.02%.

0

5000

10000

15000

20000

25000

30000

Food Construction Furniture Transformational

Basra Industries Total Industrial

Sector

Rate of Industries in Basra Province Compared to Total Industrial Sector

47

Table (3): Indicators of Large, Mid and Small Industries in Basra Province in 2007

Item Large

Projects %

Mid Scale

Projects %

Small

Projects % Total

Total number of projects 9< 3 ;< 5 89.. =9 8:5:

Projects in operation 59 :. 9: ;3 :;: 09 ;:;

Projects not operating 35 8. 33 3< - - 89

Number of governmental projects 09 - - - - - 09

Number of private projects

85 .6=5 ;< 06:< 89.. =;6

5< 8:30

Total number of the employed ;;3:. =8 039. 0693 55<9 .6.

3 <0<=9

employed in governmental

projects

;5=:. =: - - - - ;5=:.

Employed in private projects 55.. 8069< 039. 096;9 55<9 836

:9 ;=59

Source: Local Government Project RTI, (Complete Statistical Survey of Basra Province for 2007). Basra, 2007.

48

First: Attributes of the Private Industrial Sector

Attributes of the private industrial sector in Basra can be identified as follows:

1. Potential and financial capacity of the private industrial sector is low and poor quality. This is obvious in the obsolete automation and

technology used in factories and plants.

2. Mid and large scale projects are few whilst small scale industrial projects has had a high increase; this results in poor industrial

production that is incapable of competing with imported products in terms of quality, class and cost.

3. Economies of scale are low for most of the industrial projects. Therefore, the productive industrial unit is of a high cost and there is a

poor level of services delivered to the private sector and industrial projects from the government.

4. The private industrial sector is still incapable of contributing to a large extent to Iraq‟s GNP. It is unable to effectively and largely

participate in supporting the national income and provide the local markets with industrial products of all types due to interruption or

low level of operation capacities.

5. Workers have a low productivity rate in the industrial sector due to the low level of production and the failure of machines to cope

with the increasing number of manpower. These machines are old and have not been replaced with modern machines.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Number Operated Projects Non operating Projects The employed

Indicators of Large, Mid, and Small Industries in Basra Province

Small Mid Large

49

6. Industrial enterprises in the province are not subjected to the standards and specifications of quality control and class. They do not

observe the industrial development laws, which have resulted in the spread of universal industrial fraud.

7. Wrong policies are put in place when dealing with the private industrial sector. Full freedom is given to importers due to a

misconception of the market economy and economic freedom.

8. Ineffectiveness of public and private commercial banks and specialized banks which can, otherwise, put a positive effort in

supporting and reviving industrial projects especially the small and mid-scale ones.

9. Prevalence of low capital and high labor operation methods as seen in small scale industries, which largely depends on governmental

support to operate, resulting in poor competition with imported goods.

Second: Core Partners in this Profile 1. Iraqi Federation of Industries – Basra Branch

2. Union of Iraqi Businessmen- Basra Branch

3. The Center of the South to Develop the Iraqi Economy

4. The Iraqi Center for Investment Studies and Information

5. Directors of private factories, plants and companies; and owners of workshops

Third: Challenges and Proposed Solutions Challenge: Continuous power outages.

Objective: To reduce the hours of power outage until factories are provided with an uninterrupted power supply.

Background: Basra province suffers from continuous power outages, which have resulted in:

1. Small and mid scale factories stop operation.

2. The high cost of production due to the high prices of diesel used as a fuel to generate power.

3. The low quantity of diesel supplied by the Commission to Allocate Oil Derivatives in the province. It fulfills the need for ten days

only, which forces owners of factories to purchase one ton of diesel from the black market.

4. High prices of local products due to the high costs of production.

5. The internal power supply grid serving several factories in the industrial zone over consumes fuel because it is obsolete and not

maintained on a regular basis.

51


1. Install special networks to provide power for factories and install power generators

and standby sources; maintain the power supply grid; increase the diesel portion

provided for factory owners; and decrease diesel prices. 2. Create cooperative associations in order to provide industrial estates with power

using private generators.

3. Prevent abuse of power supply grids by those not provided with the required meters.


Departments of Electricity in Basra

Commission to Allocate Oil Derivatives in

Basra

Challenge: Suspension of the Customs Duties Law

Objective: Enforce the Customs Duties Law and increase the tax burden.

Background:

1. Suspending the customs duties on importations has resulted in open transportation and very low prices of imported industrial

goods. Only one tax is imposed, the Iraq reconstruction tax (5%).

2. There is a 20% tax imposed on raw materials imported by the industrial sector for industrial purposes.

3. High prices of production inputs due to high taxes imposed on them and the bad quality of inputs such as steel, wood, and

coloring substances, which are used as a basic material in manufacturing. This makes it very difficult for the factory owner to

carry on with their work or to develop products and compete with imported goods. Foodstuff, medications, medical tools,

garments, books and items set for human aid purposes have been exempted from tax, though.

4. Unjust taxes are imposed on the private sector factories including the direct cash tax of ID 18,000 per worker/year in addition to

the company tax, which was developed on old principles that do not cope with the inflation rates prevailing in Iraq.

5. The Tax Department collects taxes from directors of factories and plants found in the new industrial zone as they do not own the

land on which the factories were built and exempt the factories in the old industrial zone from such taxes as they own the land.

51


1. Exempt production inputs and raw materials that the private industrial sector needs from

customs duties or reduce them in order to support local production and protect it from

competition from imported goods. Importers must be committed to import raw materials that

conform to standards and specifications; also subsidize their prices to decrease the costs of

production. 2. Remove taxes imposed on the private industrial sector in order to develop and advance it;

and amend the Company Law.

3. Enforce the role of the Public Commission for Industrial Development which used to supply

the private sector industrialists with several raw materials to be sold for competitive prices. 4. Factory owners in the industrial zones must be empowered to own the land on which their

factories are built in order to encourage them to develop and expand their industrial

businesses.

Ministry of Finance/ Public

Commission of Taxes

House of Representatives at the Iraqi

Parliament

Ministry of Trade

Ministry of Industry and Minerals

Ministry of Municipalities and Public

Works


Challenge: The poor efficacy of COSIT.

Objective: Enforce the role of COSIT to enforce quality controls on imports and counterfeit goods entering into the local market and

suspend operation of local factories that do not observe quality standards.

Background: COSIT is the agency responsible for supervising and regulating the application of approved standards and specifications

for goods entering the country. However, poor efficacy of this office has resulted in the importation of poor quality, cheap goods, which

results in local factories stopping operation. Some local factories have no discipline at all and they produce bad quality goods that

compete with the good quality commodities just because of their low price.


1. Provide necessary safeguards for emerging national industry by enforcing the role of

COSIT. 2. Enact laws to prevent entry of industrial commodities that do not comply with approved

standards and specifications. 3. The government must issue legislation to promote its departments by giving preference to

their production.

Ministry of Planning and

Development Cooperation


Ministry of Trade

House of Representatives in the Iraqi

Parliament

52

Challenge: Lack of government support

Objective: Enhance government support for the private industrial sector to enable it to develop its capacities and compete.

Background: 1- There is poor financing for developing factories and plants to acquire new technologies. This is due to the low amounts of loans

that the Industrial Development Commission and the Industrial Bank provide. In the best case scenario, such loans mount up to

ID 30 million. In most cases, factory owners are unable to obtain a loan at all due to administrative corruption. Moreover, the

interest rate reaches 9% per annum and the payback period is short. Therefore, many owners of factors go to private banks to

obtain loans at 23% interest.

2- Processing applications and files related to private industrial projects is too hard and takes a long time at the Industrial

Development Directorate in Baghdad. This is due, first, for its remote location and having all private industrial enterprises in

Iraq report to this directorate, which, secondly, results in confusion and delayed processing.

3- Some factories depend on the government sector to provide them with production inputs or raw materials. Later on, the

government purchases their product for very low prices and most often, the raw materials imported for the private factories are

of a poor quality.

4- Obviously, government support for industrial sector projects is absent as can be inferred from the fact that the Industrial

Development Directorate has stopped providing private industrial projects with production inputs for subsidized prices.

5- Land on which industrial premises are established with a prior approval by the governmental agencies cannot be given in

ownership under the Law of Proprietorship which enables the industrialists to own the land after 10 years as from building the

premises.

6- Some governmental agencies require construction projects to use imported materials, which causes negative impact on the local

industry.

7- The limited role of the legal attaché or the economic/commercial office at Iraqi embassies in neighboring countries when the

Iraqi industrialists request compensation or to return goods. Several Iraqi importers who import raw materials were victims of

fraud exercised by exporters in neighboring countries. These exporters sell damaged goods and change the country of origin

label or the expiry date. Thus, importers incur large losses.

8- The local market is unable to absorb locally manufactured materials due to the large volume of imports that exceed the need of

the local market. This has resulted in the local product to be stacked and unmarketable.

9- Most of the factory equipment and machines run by the private sector have depreciated, resulting in several factories closing

down. New machines cannot be imported due to high prices.

10- Many technicians and skilled labor in the industrial zone opted to join the Ministry of Interior and the Ministry of Defense to

receive higher salaries. Private sector industries do not have the skilled labor they need.

53


1- Provide advances and loans that are sufficient and relevant to the size of the

factory. These are to be provided in a transparent manner that makes it possible

for all industrialists wishing to borrow to get them easily and justly. The interest

rate must be decreased and the payback period must be extended in order to

expand production and open new production lines and small production plants as

well as insure the bank credit risks from a fund especially established for this

purpose. 2- Open a branch for the Industrial Development Directorate in Basra province to be

responsible for the province‟s industrial sector and in southern provinces as a

whole. This will help facilitate application processing. 3- Provide factory owners with good quality raw materials. 4- The government must promote local products to increase their competitive edge

and marketing mechanisms. 5- The local government unit must undertake the procedures required to have

owners of factories and plants own the land in the new industrial zone. 6- Motivate those who implement government projects to use local raw materials

and production inputs. 7- Activate the legal attaché section at Iraqi embassies to claim rights and

compensation for the Iraqi importers in countries where commercial exporting

fraud takes place, especially after concluding commercial agreements between

the foreign exporter and the local importer. 8- Establish a network of modern transportation vehicles to connect Basra with

neighboring countries in order to support Iraqi exports. 9- Support the private industrial sector and provide tax and excise exemptions to

enable it to increase the minimal wages. 10- Encourage exhibitions locally and outside Iraq and enhance the marketing

domain to promote industrial products.

Ministry of Finance


Ministry of Trade

Ministry of Planning and Development Cooperation

Ministry of Municipalities and Public Works

Ministry of Housing and Construction


Ministry of Transport and Transportation

Public Tax Commission


54

Challenge: Foreign investor partnerships are almost nonexistent, even though laws to motivate and attract foreign investments have

been enacted.

Objective: Promote partnerships between local and foreign investors to establish developed industries that are still not found in Basra

province.

Background: 1- The Foreign Investment Law has been enacted and it provides for 100% foreign investor project ownership excluding the

natural resources and oil. This investment can be officially registered as a leasehold contract that extends to more than 40 years

for fixed assets. Any foreigner can establish or hold shares in any Iraqi company. However, all of these incentives and other

incentives have not promoted foreign investment to flow into Basra due to the lack of a relevant investment environment,

administrative and financial corruption and multiple decision making sources.

2- The inability to partner with foreign investors has resulted in local industries using obsolete technology to produce poor quality

goods for high costs that cannot compete.


1- Establish safe investment zones where a developed industrial base and active financial,

commercial and service sectors is available. 2- Local authorities must cooperate with the competent ministries to provide security protection for

projects established within these zones as well as providing required infrastructure to establish

projects and enforce the Law of Land Entitlement of 100% according to the economic

importance of the project. 3- Provide electronic data and statistics to cover sectors and industries set to attract investors. 4- Publish an investment map to show the available investment opportunities. 5- Provide the relevant social environment to accept the idea of having foreign investors in the

province. This can be achieved through promotion and educational campaigns on foreign

investment and its significance in the national economy. 6- UNCTAD (UN Conference on Trade and Development) mediates in exploring foreign small and

mid scale industrial projects to enter into partnerships with local ones. The Iraqi Industries‟

Federation can assume a positive role by contacting industrial partners in Southern and Eastern

Asia countries to create partnerships with them. Among the useful websites: www.untpe.org. It is

a service system that provides for free industrial opportunities and guidance on an international

level. Also, there is the website: www.gtpnet-e.com




Ministry of Interior



Relevant Businessmen Organizations

and Associations

http://www.untpe.org/

http://www.gtpnet-e.com/

55

Challenge: Long and complicated red tape to register a company

Objective: Deregulate the company registration process and assign it to a specific agency with a multiple mandate.

Background: 1- The routine procedures to register an industrial company or manufacturing plant at the Ministry of Industry and Minerals and

other relevant agencies is complicated. An investor wishing to establish a plant or factory must obtain approvals for or from the

following: Construction Planning, Licenses, Civil Defense, Ministry of Oil, Department of Environment, Ministry of Health,

Ministry of Tourism, and Social Security. This delays the association process for several months and sometimes more than one

year. In addition, exporting licenses and certificates are also complicated because they can be obtained only from Baghdad.

2- Delays because of administrative sluggishness which is sometimes deliberate, for example deliberate delays by the government

when paying for completed contracts. However, such a delay is never there when the supplier is from an Arab country. To the

contrary, he is given an advanced payment for operation until the contract has been completed.

Challenge: Shortage in skilled labor with a high level of technical training

Objective: Provide training for workers and have them join training courses to increase their technical skills.

Background: Most of the private factories and plants, especially print houses, have a large shortage of skilled and technically

experienced labor to operate modern printing machines. Thus, they have to go to Baghdad to recruit required technicians for very high

fees.


1- Industrial company and plant registration procedures must be assigned to a single agency or

a unified registration office. 2- Owners of local factories and plants who have contracts with the government receive the

same benefits provided for an Arab or non-Arab contractor.


Ministry of Oil

Ministry of Health

Ministry of Environment

Ministry of Tourism

Ministry of Labor and Social Affairs

56


1- Provide technical support for private factories by having their technicians join special

courses in and outside Iraq. The state must pay for their training fees. 2- Develop training and technical qualification centers to provide technical expertise on

modern technologies and to develop educational curricula in line with technological

development. 3- Industrialists must be required to go to training courses to be qualified and familiar with

modern technology and administrative approaches to production.

4- Cooperate with state operated vocational training centers to organize training courses for

workers to develop their skills and increase their proficiency.


Ministry of Higher Education and

Scientific Research

Ministry of Labor and Social Affairs

Challenge: Municipal services are not provided in Hamdan Industrial Zone.

Objective: Provide municipal services for industrial zones to facilitate implementation of jobs.

Background: 1- Municipal services are not provided. These include: road asphalting, sanitary system, waste collection, tree plantation and other

municipal infrastructure services. The industrial zone is sinking in still water due to rain. In addition main roads are abused and

closed and large vehicles are unable to use them.

2- Water treatment machines are not available to provide industrial projects with desalinated water; which results in poor quality private

industrial sector products.

3- Reverse migration of plant owners in the industrial zone to the city to open their workshops to deliver the same services as in the

industrial zone. This has resulted in:

A further burden on the power supply system in the city

Abuse of public property

Closing down several shops inside the industrial zone as they could not continue due to the concentration of businesses inside

Basra city.

Owners of shops in the city center make easy profits for no cost; they do not pay rent or additional fees to the municipality.

Pollution and noise caused by those factories as they are located in neighborhoods.

There is no health care center in the whole industrial zone. Such a center is very important due to the occupational injuries

that workers are exposed to. No police station is found to help secure the zone and protect factories from robbery or

destruction.

57


1. Work on rehabilitating and developing industrial zones already in existence.

2. Establish industrial parks with integrated specifications and provide them with

required industrial services especially power supply sources, transportation and

communication. The main attributes of these parks must be:

- Relevant land for the types of industries that do not cause environmental

pollution. They must be away from housing or agricultural areas that can

be affected by pollution.

- Land allocated for each project is relevant for the machines used, the size

and quantity of production and warehouses used for raw materials and

products.

- Build paved roads to facilitate entry and exit of trucks carrying goods and

build railways that reach these parks as necessary and in line with the

nature of industries in these parks.

- Provide power supply and build electric transformation plants, also

provide power networks for factories and install power generators as a

standby source.

- Sketch up to date architectural designs to have the industrial zones as a

civilized façade that reflects the progress taking in the country including

the national industry.

- Provide telecommunication and internet facilities for factories in these

parks. - Provide sanitary networks, rain water networks and waste water treatment

plants.

- Establish plants to treat industrial waste at parks in need of such plants. 3. Provide the industrial zones with treatment machines to purify water using reverse

osmosis.

4. Close factories and workshops that operate inside the city without duly issued

approvals and have them limited to the industrial zone. 5. Establish a health care center inside the industrial zone to treat injuries. A police

station should be created as well.


Municipal and public works departments in Basra

Departments of Interior

Transport Commission

Department of Electricity in Basra

Department of Environment

Department of Tele-communications

Department of Health of Basra

58

Challenge: Quarries and construction companies suffer from several problems that have resulted in several ceasing operation and

closing down.

Objective: Support quarries and companies producing construction materials to be able to produce and export surplus to neighboring

countries.

Background: The low quantity of fuel supplied to quarries by the Oil Products‟ Distribution Company, it is 1,600 tons of diesel forced

the quarries to purchase the additional amount- 3 tons from the market; several quarries, in fact, are unable to continue operation or

achieve profits.

1- Failure to export the surplus product to the neighboring countries especially Kuwait due to the security status on the international

highways that prevent the neighboring countries‟ from sending trucks and vehicles to transport the quarries‟ product. They fear

robbery.

2- The advanced Industrial Development Commission payments provided for quarries are very low. These payments do not exceed

USD 20,000, which covers only a very small portion of the production assets for quarries not new investments in new quarries or

other equipment. For instance, a bulldozer shovel size 70 alone costs USD 40,000.


1. Increase the share of quarries‟ fuel to cover at least 80% of their needs.

2. Secure international highways that link the province with Kuwait in order to secure exports of

the quarries‟ products, which have a high rate of demand for their high quality, low prices, and

prompt delivery.

Ministry of Oil- Commission of

Distributing Oil Products in Basra



Challenge: Dumping the local market with imported goods, which has resulted in several factories stacking product.

Objective: Enforce anti-dumping laws.

Challenge: Several countries, such as China, have low cost production inputs and labor. Their governments provide employment and

transportation logistics support for their exports which allow them to dump products in the local markets. They do this apart from the

specifications of the commodity and production capacities are staying idle.

59


Enact special laws to combat dumping policies that are being applied in several countries to

protect emerging national industry. The House of Representatives at the Iraqi

Parliament

Ministry of Trade


Challenge: Lack of social security schemes for workers

Objective: Enforce the Social Security Law to cover workers at private factories.

Background: Workers at private factories who die at work face the problem of the Social Security Department not paying dues to their

heirs. They argue that the factory owners do not pay the monthly subscription fees set for each worker and don„t disclose true numbers

of those working for them. On the other hand, the factory owners blame the Social Security Department for not collecting monthly

deducted fees on behalf of workers at factories although workers are willing and ready to pay those amounts.


Enforce the Social Security Law by having the Social Security Department collect the amounts required for

the social security from the directors of the private sector factories in order to pay the social security dues to

heirs of those who die at work.

Directorate of Health Care

Fourth: Challenges and Aspirations

The Private Industrial Sector in Basra province faces many impediments that challenge its development and expansion. This sector

remains isolated from scientific and technological developments. The government has failed to protect the emerging Private Industrial

Sector. It failed to support and empower the sector in order to be able to compete. This has resulted in Basra‟s Private Industrial Sector

facing foreign competition challenges that outweigh its potential and capacities. Many private sector factories had to be closed down and

indicators of a collapse of the private industrial sector have emerged. The private sector has competent human resources with good

experience that have been working for several years in industrial domains. They enjoy sufficient experience and knowledge to manage

and operate in several industries and provide quality products that can compete with imported industrial commodities. However, the

private sector looks for government support to introduce packages and procedures that can help change and develop the private sector

structure in Basra. These include:

61

exemption from profit and income taxes, and customs duties imposed on imports of supplies and production inputs;

bank loans;

effective monitoring of imports in order to support local product competitiveness;

allocation of some part of the general budget to support the private industrial sector;

release sufficient advance payments to industrialists to help them restart suspended projects;

instruct the Industrial Bank to provide soft long-term loans for industrialists to help them develop their projects;

revive the industrial sector by being on good terms with advanced industrial countries and conclude technology transfer

agreements with them;

conclude free trade zone agreements with Arab countries to increase opportunities for knowledge transfer and mutual projects;

introduce new master plans for the land allocated for industrial projects;

coordinate policies and legislation;

reduce costs and increase production rates;

improve basic regional transportation and communication infrastructure in order to enable the private sector to develop;

cooperate and coordinate with Arab and international organizations to exchange information and expertise;

organize specialized conferences

establish joint research, development and training centers;

make use of donor countries‟ and international economic organizations‟ advanced expertise and financial and technological

support for Iraq to develop this sector and increase the level of technical, professional, and administrative expertise needed for it.

The government must know that the market economy transition cannot take place so quickly. It must set a plan to develop small and mid

scale industries as well as provide bank facilities for this sector. Some general budgetary item(s) must be earmarked to back up the

private industrial sector. Agreements need to be concluded with industrial countries for technology transfer to this sector. The local

government set plans to develop it, provide assistance to industrialists and instead of marginalizing them, involve specialized

academicians to submit practical studies and plans to develop this sector.

61

62

The Private Trade Sector

Summary: To a large extent, the Iraqi economy depends on foreign markets to provide for its economic needs of goods and services due to the high

degree of economic openness. This has resulted in a high degree of Iraqi economic affiliation to other countries. The export of Iraqi

commodities has been limited to some cereals, dates, olives, and animal skins. Oil exports count for the largest share on which the

government depends to finance the general budget. Iraq depends to a large extent on imports to cover necessary goods it needs to fulfill

citizens‟ needs and economic development.

After the former regime collapsed, all types of customs duties on commerce were removed and no quantity or quality limitations were

imposed on imports. The excise was removed in April 2003. Since then, a tax of 5% has been imposed on imports. This has resulted in

increasing import values for all sectors, and can be seen as the highest in Iraq‟s trade history. Basra‟s non-oil exports include animal

wool and skins, dates and a very small volume of seeds. However, commercial companies‟ imports are concentrated in Basra including

first foodstuffs, followed with durable hardware, dyes, construction materials, and spare parts for vehicles. Imports are the largest

component of commercial companies in Basra province especially in China, Iran and United Arab Emirates. The trade sector is

challenged with several problems including: lack of specifications and quality control of imports, resulting in dumping bad quality goods

on the local market, and closing border exits and short working hours when the border is open. There are some external challenges

related to legislation and laws imposed by the Arab and non-Arab countries on goods exported thereto. Other points include the

continuity of customs duties on the goods exported to Arab countries. Most of these countries use negative lists to exclude certain goods

from being subjected to reduced customs duties mutually agreed upon. There are other duties in addition to the customs tariffs, which

have high rates, and other non-tariff procedures such as governmental certificates and ratifications rather than having only the official

documents of origin.

Introduction

The trade sector‟s importance stems from its contribution to economic development. Capital goods are required for reconstruction and

to build up production capacities. Export revenues have a great impact on the economy‟s structure and balance, clearly reflect the

productive structure of the national economy and impacts economic policies. The structure of exports and imports reflect economic

development levels. High volumes of value added industrial exports indicate that the economy is developed and more stable. High

volume exports of raw materials, agricultural and primary products and high levels of industrial imports mean that the economy is under

developed and is still suffering from several problems.

The importance of foreign trade in the economy can be measured through the economic openness index. This index counted for

124.65% in Iraq in 2007. This high rate reveals that the Iraqi economy heavily relies on foreign markets, including goods and consumer

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and investment services, to secure the economy. It also reveals the size of increasing reliance on the foreign world, which means that the

Iraqi economy is sensitive to external developments such as international prices, financial, economic and trade policies of trade partners,

agreements and economic blocs.

The composition of the Iraqi trade sector makes it more open and more dependent on the foreign world. Oil exports counted for 96% of

total exports for 2007 for an amount of USD 39.5 billion against only 0.4% of goods exports for a value of USD 172 million.

Exports of goods are limited to unprocessed cereals, dates, olive, goat and sheep skin, sheep wool and used paper. Therefore, the

economy of Iraq depends, to a large extent, on imports to cover the goods necessary for infrastructure build up and for economic

development.

Syria comes in first place in terms of countries to which Iraq exports its goods- 41.2% of total Iraqi exports, then, Jordan- 27.8%;

followed with the Emirates- 22.8%.

Table No. (1)- Iraqi Oil and Non-oil Exports in 2007

Year

Good

7557 Rate of Exports 7551 Rate of Exports Annual

Increase

Rate

Crude Oil 3<:.=6=: =;688 5=95.6:8 =96;= 5<63

Oil Derivatives 9=.6:3 36.0 09:86=. 56;= 0:96..

Exports of

Commodities

0:.65. .699 0;365: .683 ;69

TOTAL 3=5:.6<< 0.. 803:;6=. 0.. 8.6<

Source: Ministry of Planning and Development Cooperation- COSIT, www.cosit.gov.iq

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Table (2): Exports of Goods to Arab and non-Arab Countries for 2006

Country

Value (Dollar) %

Syria

73, 887, 118

37.78

Jordan

33, 331, 177

71.83

Emirates

57, 337, 337

77.85

Egypt

873, 355

5.75

Lebanon

877, 377

5.35

Morocco

8, 733, 733

3.73

Kuwait

738, 751

5.58

Iran

378, 733

5.77

India

778, 558

5.73

Turkey

755, 575

5.77

Other countries of the World

7, 577, 555

7.77

TOTAL

775, 555, 555

100

Source: Ministry of Planning and Development Cooperation- COSIT

www.cosit.gov.iq/all_reports_12.php

Imports from Syria were estimated at USD 6.3 billion in 2006, then Turkey at USD 4.234 billion and the United States of America at

USD 2.444 billion. Foodstuff, drinks, cereals, raw materials, metal fuel, machines, and transportation equipment were the main goods

imported.

http://www.cosit.gov.iq/all_reports_12.php

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After the collapse of former regime, all types of restrictions imposed on trade were removed. There is quantitative or qualitative

limitation for imports. The customs tax has been removed in 2003 and a tax of only 5% has been imposed on imports except for some

items including foodstuff, medicines, clothes, and human aid.

The law issued by the government provides for direct relations with foreign companies and trade agents. This has resulted in high rates

of imports for all sectors, which can be the highest all over the history of trade in Iraq. Basra province enjoys a distinguished

commercial location through which it links with the Arab Gulf in three major ports- Umm Qasr Port, Khor AzZubeir Port, and Abu

Flous. In addition, there are several land exits such as Safwan Trading Point with the Kuwaiti borders and Chalamcha border point with

Iran. Basra province‟s exports include mainly wool which comprises more than half of exported volume, animal skins, dates and a very

low quantity of seeds. Imports by trade companies in Basra province comprise mainly of foodstuff, durable house-ware, dyes,

construction materials and vehicle spare parts. Importing is the largest trade company activity in Basra province, especially from China,

Iran, and United Arab Emirates. The number of companies registered at the Chamber of Commerce of Basra count for 532 companies.

First class companies count for the largest part of these companies- 56%.

Table (3): Companies Registered at the Chamber of Commerce of Basra in 2007

Commercial

Classification of the

Company

Number of Registered

Companies Relative

Significance

Excellent 3. 8 First 5.0 9: Second and Third 300 8. TOTAL 357 755%

Source: The Local Government Project (RTI) in Basra, the Total Statistical Survey for the Province of Basra for 2007

The trade sector in Basra is challenged with several problems and intricacies including: (i) lack of specifications and quality assurance of

imports, resulting in dumping the local market with bad quality goods for low prices and damaging local industries; (ii) closing border

points and the short working hours; (iii) underdevelopment of the banking system to facilitate the trade sector operations and other

internal challenges. There are other external challenges many of which relate to legislation and laws imposed by Arab and non-Arab

countries on goods exported thereto including: (i) customs duties on goods exported thereto; (ii) several Arab countries use negative lists

to exclude certain goods from customs duties reduction agreed upon; (iii) there are additional fees imposed other than customs tariff in

high rates; (iv) non-tariff procedures such as certificates and governmental ratification procedures rather than just admitting the official

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documents from the country of origin. Other impediments include opening letters of credit, bank guarantees and their high costs,

difference in specifications and standards, non standardized customs legislation and regulations among Arab countries, slow and

scattered procedures at the land border points among Arab countries and multiple and varied documents required to process a file or an

application. Customs procedures also include sample taking at borders, long periods required for testing and the lack of labs required for

such testing at the border points. This results in delayed delivery of goods and their damage some times. Procedures for transit entry of

trucks are complicated and transit costs are high, goods in transit mode are set for inspection resulting in delay and damage of goods

sometimes due to repeated loading and unloading actions, laws and regulations related to loads are different and entry visa issuance for

businessmen takes a long time.

Although there is an Arab dispute resolution mechanism, it is still noticeable that there is no Arab arbitration commission to resolve

disputes and disagreements over trading issues among/between the contractual parties. Each country depends on its local judiciary.

However, in most Arab countries there are no monitoring mechanisms to follow up enforcement of trade agreements and poor legal

status of such agreements if any. Due to the variation of these policies from one country to another, it is hard to monitor and evaluate

enforcement of agreements. Directives of trade policies include lots of contradictions, which makes it very complicated to implement the

agreements signed between/among countries although there are several trade exchange agreements aimed at supporting the inter-Arab

trade. The integration basis that could have helped a successful enforcement of these agreements is still not found, and the Arab

economies are still full of replicated structures and activities from one country to another making them competitive structures rather than

integrated ones.

First: Attributes of the Private Trade Sector Attributes of the Private Trade Sector can be stated as follows:

1. Random non-regulated importation of the several goods and from different origins with a very poor quality, and dumping the

market with counterfeit goods.

2. Poor quality control and assurance of imported goods at border entries due to administrative corruption at customs checkpoints,

which results in illegal entry of poor quality goods.

3. Absence and poor quality of international trade agreements, which prevents exportation of Iraqi goods and presents several

obstacles to trade.

4. The lack of a precise statistical database of important economic and technical limitations.

5. Poor diplomatic relations with several Arab countries; which negatively impacts inter-trade activity.

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Second: Core Partners of the File: 1. Businessmen Federation- Basra Branch

2. Chamber of Commerce of Basra

3. The Center of South for the Development of the Iraqi Economy.

4. The Islamic Trade Union.

Third: Challenges and Proposals Challenge: Poor performance of COSIT and the problem of it being a centralized entity.

Objective: Have COSIT operate on a wide scale to control quality of imports and their authenticity as well as the good quality of

locally produced goods.

Background: 1. After 2003, COSIT‟s operation was limited for three years, which resulted in imported goods not being subjected to laws issued

by the Office. This, in turn, resulted in the spread of commercial fraud and bad quality of some locally produced goods.

2. Absence of laws and regulations that used to be enforced to control the importation process, resulting in “chaotic” importation.

3. The poor finances of COSIT which prevents it from opening branches at the border exits in order to inspect imported goods,

especially food items. Technical staff is not sufficient at border points and, when available, they do not have enough experience

to classify valid items and sort them out from the invalid ones. This results in a long delay of entry of imported goods, causing

them damage in some cases, and allows the entry of corrupted food items.

4. There are no refrigerated stores at the border points.


1. Emphasize the importance of providing legislation and laws to regulate the importation

process and prevent entry of goods that do not conform to the specifications set by COSIT.

Regulated and organized stores must be established (customs bonded) in order to inspect

consignment details and deliver work in coordination with the relevant agencies.

2. Open branches for COSIT at the border points to inspect imported goods especially food

stuff and provide them with highly trained technical staff.


Developmental Cooperation

Public Commission of Customs

Ministry of Health


Ministry of Trade

Challenge: Closed border exits and set hours to open them.

Objective: Open the closed border exits and extend working hours.

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Background: Due to security, the border point in Chalamcha is closed from time to time. It is closed for long periods of time according

to security, limiting the hours for the border exit with Kuwait to be open. This has resulted in delayed entry of and damage to imported

goods at the borders and high costs of transport from the border exits.


Open the border exit with Iran and coordinate with the Kuwaiti side to open the border exit all day long.


Ministry of Trade

Challenge: Banks are not providing banking facilities to traders.

Objective: Develop banks‟ operations to provide better services for exporters and importers.

Background: Public banks in Basra province do not provide letters of credit for importers and exporters. Letters of credit require the

importer to pay the amount of the invoice to the exporter in another country upon an agreement with the bank. This procedure is not

made available in Iraq, though.


1. Expand the public banks‟ operations to provide exporters and importers with foreign transfers for some fee

to provide a guarantee of the importation/exportation license. 2. Have the public banks open documentary letters of credit for Iraqi importers and exporters in Basra to

facilitate cross border trade. This will enhance trade as the routine procedures for a financial transfer will

be better managed and delivery by both the importer and exporter will be better guaranteed.

Ministry of Finance

Ministry of Trade

Challenge: Delayed issuance of entry visas for Iraqi traders.

Objective: Accelerate entry visa issuance procedures.

Background: There are serious delays in issuing entry visas for traders. Several times these visas are not issued to several countries

where Iraqi traders would like to go for business purposes. This is another impediment for diversifying imports which have to be limited

to a limited number of countries the current status.

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Sign a joint Charter of Action with the several countries that the government holds friendly relations with in

order to facilitate visas for Iraqi traders who have an import/export card or a Chamber of Commerce

membership card.


Ministry of Trade

Challenge: Importers signing contracts with public sector departments do not receive their dues in a timely manner.

Objective: Importers are paid the amounts required as agreed.

Background: There are recurrent and deliberate delays by government institutions in disbursing cash dues to traders who import several

goods for them because of financial and administrative corruption.

Proposed Solution Competent Authorities

Accounting units in the public departments delay payments of Iraqi traders who supply the governmental

sector with its needs. Integrity Commission


Challenge: Impediments hindering private sector exports including finished and other goods.

Objective: Enforce trade agreements with Arab and other countries to facilitate the flow of Iraqi exports.

Background:

1. Arab countries impose tariff and non-tariff procedures (including customs duties) on Iraqi commodity exports. They use negative

lists to exclude some goods from customs duties reductions. They impose extra fees in addition to the customs tariff in high rates.

Customs authorities require the certificates of origin and ratification procedures, etc. 2. Standards, specifications and customs procedures and regulations are complicated and vary from one country to another. This puts

an exporter in a confusing status with regard to the standardized specifications that need to be approved and admitted by most of

the countries. 3. Financial legislation and laws are not standardized in one law among the Arab countries. Monetary restrictions are imposed on

imports and Arab banks and banking institutions do not coordinate to standardize banking procedures required to secure non-

duplication of banking costs. Procedures to open letters of credit and bank guarantees are not made easy and their costs are high.

The role of banks in providing facilities and guarantees to support commercial activities is still absent.

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4. Procedures are numerous and slow at the land border checkpoints, customs documents required are multiple and varied and

sampling procedures are complicated at the borders. Tests take a long time and testing labs are not found at the border points,

delaying delivery of goods and repeated loading and unloading causes damage to goods. 5. There is no competent arbitration commission to resolve disputes among contracting parties. Each country depends on their local

judiciary which means slow delivery. Dealing with export financing agencies is complicated; there is a lack of monitoring

mechanisms and implementation of agreements, and a poor legal framework for these mechanisms when they are in place. This

impedes implementation follow up as most of the legal decisions issued in this respect are non-binding. 6. Although there are several trade exchange agreements, and attempts to support inter-trade activity, the absence of real efforts to

implement these agreements has resulted in several duplications of procedures from one country to another.


The Iraqi Government is capable of solving the above mentioned problems and

impediments. It can help the private sector to increase the level and volume of exports by

means of enforcing trade agreements that the government signed with the Arab and non-

Arab countries. It can commit those countries to implement them and apply the reciprocity

principle in dealings in case they complicate entry procedures for the Iraqi exports to their

territories.


Parliament

Ministry of Trade

Challenge: The Free Zone in Khor AzZubeir still has a low level of trading activity.

Objective: Promote exportation of local goods and importation through the Free Zone.

Background: Goods are not being exported from Basra province to countries abroad through the Free Zone due to the fact that

exporters are exporting their goods through the customs points in the ports of Umm Qasr and Khor AzZubeir instead of the Free Zone.

This is due to the fees, taxes, and customs restrictions imposed on exported goods and products at the border points when entering into

the Free Zone. Then, goods are charged additional costs when exported including holding and releasing fees as well as the public service

rate (1% of the goods‟ value).

71


Cancel fees and charges imposed on goods exported at the Free Zone in order to encourage traders to export their

goods through it. Ministry of Trade

Challenge: Dumping poor quality goods and commodities on the local market for cheap prices.

Objective: Introduce anti-dumping procedures to protect the local market.

Background: 1- From the international trade perspective, dumping is viewed as an illegal trade practice. A product is exported for less than its real

cost and lower than the exportation and customs duties expenses with the aim of dumping the Iraqi market to get competitors out of

this market. This is an introductory step to control and monopolize the market and then increase the price again when the

competitors are out to achieve large profits.

2- The dumping policy causes financial damage to the private sector industries in Basra province and impedes its development and

advancement. This policy becomes more serious due to the fact that the government is unfamiliar with the methods of responding to

such a policy and there is not enough available technical staff who can implement the required procedures.


1. Being an observer at the World Trade Organization, Iraq can enforce some legal anti-

dumping provisions issued by the Organization. The WTO permits the importing

country to create safeguards in response to dumping cases. It permits them to impose

offset charges on the dumped products (dumping charges). A product is seen as

dumping if its export cost is less than the price of an identical product when released for

consumption in the exporting countries; this causes damage to the local private industry

producing the identical product in the importing country. 2. Issue a special Anti-dumping Law to be applied to international trade practices that

cause damages or threaten to damage the industrial private sector and identify cases of

dumping as well as the subsidy provided by the governments of the exporting agencies

of an industrial product to Iraq for the purpose of making safeguards.


Parliament

Ministry of Trade



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Challenge: Commercial fraud by local importers.

Objective: Have the government intervene or return goods violating the agreed upon conditions and requirements.

Background: Several Iraqi importers have been victims of fraud and counterfeit cases from traders in neighboring countries. This fraud

covers imported goods whose full costs have been paid by the importer. The importer

faces very hard difficulties if attempting to return such goods. Some importers are unable at all to return such goods.


The government must support traders victimized with commercial fraud through legal

procedures to help them get a refund for those imported goods and facilitate the process to

return them. Lists of companies and exporters exercising commercial fraud must be published

as black lists to avoid dealing with them.

Ministry of Trade



Challenge: There are large numbers of unregistered traders.

Objective: Commit all importers to obtain official and duly issued documents and licenses to help them practice their profession.

Background: Due to the poor legal framework of trade transactions, there are many traders not registered at the Chamber of Commerce

of Basra. These import poor quality goods for low prices to make easy profits with low costs. Non-registered traders do not pay the

annual tax or fees imposed by the Chamber of Commerce on registered traders.


Strictly commit all importers to obtain official licenses of importation issued by the Chamber of

Commerce of Basra. Ministry of Trade


Challenge: Poor potential to open business representation offices

Objective: Open business representation offices in countries where Iraq holds distinguished trading relations to promote private sector

exports.

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Background: It is important to open business representation offices in the countries where Iraq holds business relations. The

Commercial Attaché will establish relations and gather information and data for the use of the private commercial sector, will help

market exports, provide information for local exporters and promote exports.


Have the Iraqi government open commercial attaché sections in order to enforce trade agreements by promoting

Iraqi exports and providing detailed information on export markets and required certificates6 Ministry of Trade

Challenge: The Total Quality Management System (ISO 9000) is not applied

Objective: Require Iraqi products set for export to improve in quality and decrease in prices by applying ISO 9000 in order to diversify

the export structure.

Background: 1- Iraq‟s accession to the WTO without prerequisites means negative and direct results for the trade sector. This is because WTO

conditions, such as other countries increasing customs duties on Iraqi exports in relation with finished products, limits the

capacity to export.

2- Approve technical specifications and standards for each exported industrial commodity. Countries need to be strict in applying the

ISO 9000 requirements especially those related to the quality of products, environment, health, and safety. These conditions will

deter Iraqi exporters from exporting due to the difficulties in accessing ISO 9000. They need to cooperate with western consulting

companies and undertake an evaluation process before getting it.


Implement a government program to improve the quality of Iraqi non-oil exports by a progressive

application of Total Quality Management (TQM) in order to improve the competitive capacity of Iraqi

exports.

Ministry of Trade




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Fourth: Challenges and Aspirations The Private Trade Sector in Basra province faces several challenges including: the poor efficacy of COSIT; which has resulted in a large

amount of chaos in importing food stuffs, commercial fraud and production of noncompliant local commodities. This caused national

industries to vanish in Basra because they are unable to compete with counterfeit, poor quality goods. Therefore, COSIT restoration is

the first step towards reviving the trade movement in the province. Moreover, border exits can be provided with up-to-date computers as

the main gates of foreign trade. Those working at these “gates” must take a training course on how to process border points operation

data in order achieve accurate and prompt delivery. The local government unit, however, can revive the trade dealings in the Free Zone

by means of trade facilities that will help attract and encourage further investors to establish commercial projects that attract foreign and

Arab investment capital. Even Iraqi investors living abroad will be willing to establish such projects if they are located in Basra city

because they look for “havens” for their investments. In cooperation with the federal government, the local government in Basra

province can provide some production inputs at the Free Zone including: power, water, roads to and inside the zone, railways and roads

outside to access the zone, residence and entry benefits for foreigners, tax exemptions, entry and exit of goods, land to establish projects

on, and banking services in the Free Zone by launching branches of banks there.

A local government unit is capable of supporting private sector exports by establishing an export development center with the mandate

of gathering and disseminating information on trade, doing assessment research and export potentials, organizing training programs for

Basra Chamber of Commerce members, looking for international export development expertise and issuing a monthly bulletin on

exports and opportunities available for exportation.

Moreover, the federal government can support private sector marketing efforts in international markets by providing for foreign trade

centers and data on foreign companies and markets, contracting international marketing companies and promotion missions,

participating in international fairs and seeking developed countries‟ assistance. Other efforts include supporting trade agreements with

Arab and non-Arab countries to help develop exports, and supporting exports to face the fierce competition especially from goods

produced in China. The Chinese government provides support for its factories and “to-be-exported” products making it impossible for

local goods to compete with them. The government can focus on supporting some of the active industries in the province as they are

known for their large scale production but are unable to compete. Support can go for three or four years as that is a sufficient period for

local products to be available on foreign markets and achieve a good reputation, which will result in more demand. The government can

also assist private factories in increasing investment in order to increase production, improve product quality and conform to

international specifications. Increased production will result in reducing costs and increasing competitive capacity so that local goods

can compete on markets inside and outside the country.

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Foreign export development requires the development of employees‟ skills and specialized training such as that involved in obtaining

letters of credit, making shipments and marketing. This requires establishing specialized training centers, providing assistance to private

companies to explore export markets, and providing sufficient data on targeted markets. Commercial attaché offices, if made available,

can provide new information and required certificates and other documents for trade transactions. The Chamber of Commerce‟s role of

tracing non-registered traders and developing local industrial and agricultural resources must be restored by the local government.

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77

The Private Transport Sector in Basra Province

Summary The private transport sector in Basra faces several problems that have resulted in a lagging land, air, and marine transport sector. Marine

transportation has been suffering the most because of these problems. There are three main ports that are the back bone of marine

transportation of Iraqi imports. The problems include bad administrative organization of customs departments operating at ports,

administrative and financial corruption inside ports, obsolete technology used by the ports‟ company, and limiting working hours for

ports and other border points. Moreover, the issuance of marine licenses and agent agreements is limited to governmental companies, so

services delivered to carriers at land and sea border points are of a low level. However, land transport companies face the problems of

high fuel prices required for transportation, unavailability of machines to identify truck loads, slow and intricate procedures

implemented at Arab land border points, and multiple and varied documents required for customs. Air travel services are of a low level

for Iraqi passengers on Iraqi airlines. The transport sector, especially the marine one, is of great importance for the national economy.

Investing in this sector is good for the future wealth of the trade sector. It is imperative to plan well in order to provide the relevant

environment to develop the operation of Iraqi ports by providing them with the latest technology and up-to-date machines that can cope

with emerging developments world-wide. Technologies used in the operation of ports have developed as they use sophisticated

electronic management systems as well as lifting forks and unloading machines to achieve competence and attract the marine transport

fleets.

Introduction

Basra province has land roads that connect it with neighboring countries. Basra borders Kuwait, in the south at Safwan city with a

border of 120 kilometers, Iran, through the Chalamcha border exit 20 kilometers away and Saudi Arabia. Transport is a promising sector

in Iraq and it has many opportunities to grow. Iraq‟s geographic location makes it important because it is the major exit between Europe

to the Arab Gulf countries and Asia. The marine transport sector is of strategic importance for Iraq, being the only exit overlooking the

Arab Gulf and is an important component of economic growth.

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Table (1)

Distance between Basra and Some Arab Countries’ Capitals

City Distance from Basra (Km)

0 Kuwait 775 3 Riyadh 737 5 Dubai 835 8 Amman 7775 9 Damascus 7735 : Cairo 7315

Source: Center of Business Information, Basra Directory of Trade and Investment, 2007, p 7

The transport sector in Basra province is divided into three major domains:

1. Marine transport sector

2. Land transport sector

3. Air transport sector

1. Marine Transport Sector

Ports in Basra province are close to the export centers in South East Asia and the Gulf. It is a vital location for transport goods. The

capacity of the ports is 3 million tons per year. It has 12 paved yards for storage, roads, and railway in addition to buildings and

services. At present, there are four major ports in Basra:

1. Umm Qasr Port: The port is located to the western gate of Basra City. It comprises two parts- the southern (old wharfs) which

have nine quays for general goods and one (Silo) quay for cereals. The northern part comprises ten wharfs for goods, quays for

containers and RORO quay as well as a platform for passenger ships. Table (2) illustrates the design capacities for Iraqi ports.

2. Khor AzZubeir Port: It is situated to 60 kilometers from the province center and 105 kilometers from the northern part of the Arab

Gulf. The port has two quays designated for the steel factory and two quays of concrete and cylindrical steel supports to import

raw iron and export foam steel (iron) in addition to five other wharfs, 250 meters long, that include warehouses designated for

storing Urea fertilizer and phosphate. The port also has 12 wharfs, 8 of which are used for commercial purposes.

3. Abu Flous Port: It is situated on the west bank of Shatt Al-Arab and is 20 kilometers south from the city center. It comprises three

steel quays each of which is 175 meters long and 18 meters wide. It is one of the smallest Iraqi ports. It comprises three quays for

general goods. It is a commercial port for varied loads and its design capacity is for 750 thousand tons/year. However, it operates

with a 1350 tons/year.

79

4. Al-Ma‟qal Port: This port ceased to operate during the war with Iran. It has six quays with a design capacity of 250,000 tons/year

and six warehouses for goods. It is 135 kilometers from the northern end of the Arab Gulf.

Table (2): Design Capacities of the Iraqi Ports

Port Designed Capacity

Umm Qasr 10.5 million tons/Year Khor AzZubeir 4.8 million tons/Year

Al-Ma‟aqal 3 million tons/Year Abu Flous 750 thousand tons/Year

Source: The Annual Report of the Iraqi Ports for 2008

Since establishment, Iraqi ports have been neglected. They have had different reporting lines from one ministry to another at different

times. They were under the Ministry of Finance, then, the Ministry of Trade, only to end up as a company operating under the

Ministry of Transport. The infrastructure as a whole was caused harm due to wars, embargo and abandonment. The Iraqi ports were

established long ago. For instance, Al-Ma‟qal Port was established in 1919. In 1975, work started on building the wharfs of Abu

Flous Port. Umm Qasr Port was built in 1965. However, the major problem is that the government did not show interest in

developing ports‟ operation due to continuous wars and the economic embargo in the nineties. All these factors caused the

infrastructure of Iraqi ports to become incapable of coping with new developments.

2. Land Transport Sector

Basra province has a good network of land transport highways, whether railways or roads for vehicles. The province links with other

provinces in Iraq through rail lines. The railway routes end in the Basrah province, which has many different lengths of railways

(139) Kms. However, there is a network of paved internal main and secondary roads in the province. Asphalted roads in Basra

measured 1879 Km in 2004. Non-paved roads are estimated at 290 Kms, or 15.4% of the total lengths of roads in the province.

3. Air Transport Sector

There are two commercial airports in Basra: the first at Shatt Al-Arab, which went out of business in 1980 and the International

Airport of Basra which is one of the main airports in Iraq. International and local flights have been using the international airport

since 2003 for transportation to Arab and international capital cities.

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First: Attributes of the Transport Sector in Basra Province

1. There is no clear regulatory agency for this sector. The Union of Transporters does not have a branch in Basra and it does

not assume an important role in this respect.

2. Multiple agencies are supervising and running this sector. Their directives and objectives overlap and regulatory

frameworks that coordinate its operations are still under-developed.

3. Administrative corruption is prevalent in some of the governmental departments involved in this sector. This prevents

equality of opportunities and does not help apply principles of meritocracy and competence.

4. Political and security interactions are having a negative impact on this sector.

5. Some outsiders are delivering services related to this sector. They are seen as part of it, which weakens the sector‟s role

and jeopardizes the credibility of those working in it.

6. Centralized operation has very serious repercussions at the border points and ports, and bureaucracy does not help meet

the dynamic operational requirements in this sector.

7. Repercussions of poor potentials available at the ports and border points in relation with the transportation operators and

the sector.

8. Transport vehicles are not made available in sufficient numbers to the operator or companies due to the requirements

imposed by the government. Only vehicles made between 2007 and 2009 are be admitted. These are of a very high value,

about USD 120,000, and the operator usually cannot afford these vehicles.

9. No precise studies have been conducted on the contribution of this sector to the province‟s income. Such a study will help

develop this sector, thus increasing its contribution given the fact that it delivers transport services for more than two

thirds of the importation/exportation processes in the country.

10. There is ample manpower available for this sector. This can help in many processes including freight, loading, and

maintenance of trucks or marine transport vessels.

11. The activity of this sector comprises of marine, land, and air transport. The latter one provides a limited contribution due

to the continuous suspension of the operation of the International Airport of Basra due to the security status and the high

costs of transport and insurance.

12. The transport sector in the neighboring countries yields large profits and benefits compared to the local transport. This is

due to the requirements set by these countries and the non-reciprocal treatment as is the case with Kuwait and Iran.

13. The government does not provide sufficient support to this sector as it does not promote the establishment of large

transport companies with the participation of the private sector in order to help reduce costs and sustain this activity on an

economic basis.

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Second: Core Partners in the Profile 1. Federation of Iraqi Businessmen – Basra

2. Center of the South for the Development of the Iraqi Economy

3. Some land and marine transport companies

4. Some experts and consultants involved in the Transport Sector.

Third: Challenges and Proposed Solutions

Challenge: Poor organizational structures of the customs departments operating at the ports.

Objective: Regulate the customs departments involved in the licensing, customs, and duties issues.

Background: 1. Importers of goods through ports face the major problem of the scattered departments involved in approving the release of

imported goods. These are spread at far distances inside the port. Importers are not permitted to admit their own cars into the port

to help them follow up processing of their applications and files. In fact, some departments are found outside the port.

2. Multiple governmental departments set the customs tariff imposed on the imported goods. For instance, a valuation made by the

employee at the Customs Department can be different from that of another employee in the same department. Some of the

imported goods do not have a customs tariff at Basra Customs, rather they must report to the Customs Department at Baghdad

regarding the tariff. This delays the process for importers and causes them to incur additional costs and fees.

3. Multiple agencies issue instructions and orders to the transport operators inside the port.


1- Assign one department as a reporting line for all the issues related to customs and fees-a

“one stop shop”. This has to be found in the port itself where importers‟ applications and

declarations can be smoothly processed. 2- Use up to date methods to communicate with the Customs Department in Baghdad (fax,

internet) in order to communicate smoothly regarding the customs tariff imposed on new

goods still not listed at the Customs of Basra. This will help reduce time required to admit

those goods into Iraq. 3- Reliance on internet facilities for data exchange among the governmental agencies under the

Customs Department for prompt processing of customs applications and declarations.


Department of Customs

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Challenge: Prevalence of administrative and financial corruption in ports.

Objective: Combat the corruption phenomenon in ports

Background:

Prevalence of administrative and financial corruption in ports, which can be noticed in several forms as follows:

1. Stealing the loads while staying in the port, especially at night and despite the strict security arrangements inside the port.

2. Multiple agencies impose fees, charges, and tariffs.

3. Some customs police members ask for bribes from the transporter.

4. Assessment of taxes and fees on goods is affected with a bribe, while the same loads are valued with different taxes and fees.


1. Enforce the role of the Integrity Commission inside the port in order to detect corruption cases

and move the corrupted officials outside the port or even dismiss them from office. 2. Produce strict and standardized regulations to impose taxes, fees, and charges for services at

ports.

Integrity Commission

Union of Transporters


Challenge: Poor quality of services delivered to those travelling with the Iraqi Airlines, which causes harm to the private carriers of

passengers.

Objective: Have the private sector establish airline companies.

Background: 1. Those travelling with the Iraqi Airlines suffer from the poor delivery of services. For instance, the late arrival and departure, the

small number of planes provided to transport the Iraqis going to pilgrimage and Umra (some religious rituals similar to

pilgrimage). They have to wait for several days before returning home.

2. Prices of tickets are the highest in the region. A ticket to Saudi Arabia for a pilgrimage purpose costs USD 540 including USD 63

for services, which are usually not delivered. Other airline companies provide a round trip ticket for USD 320 with very good

services provided. However, these are not permitted to operate in the Iraqi ports.

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Permit the private sector to open offices for the international airliners in Basra Airport in order to

improve the quality of services provided for passengers at lower prices in a competitive framework.

There are several private companies in Basra Province that are really willing to open such offices if they

are given an official license for this purpose.

Ministry of Transport and

Transportation


Challenge: Obsolete technology used by the Iraqi Ports Company

Objective: Provide the Iraqi ports with up to date equipment and machines as needed for loading and unloading.

Background: 1. The Ports Company uses machines and transport equipment such as lifts, cranes, and container cases that are old and of few

numbers. This impedes and delays loading and unloading processes. Unloading of ships and vessels is delayed for several days.

Containers are caused harm as they fall down from high altitudes due to bad and careless loading. Importers incur losses

especially of electric machines and equipment. Moreover, buildings required for storage are not sufficient due to the few number

of container cases in Umm Qasr Port. There is only one lift for the wharf No. 20. This requires the importers to pay USD 100 to

lift each container.

2. The few handling equipment, lifts, and cases have resulted in the accumulation of containers on the port quay. Containers count

for 1150 and most of them are exposed to damage due to the delayed lifting process and not fixing the non-operating electric lifts.

There are 47 of these lifts and they are over 35 years old.

3. The recurrent power cutoffs, which stops shipment and loading processes.

4. Staff members are not provided with sufficient training courses to help develop the management and operation skills for the ports.


1. Contract international companies specialized in supplying the Iraqi ports with modern

equipment and machines with sophisticated technology to help cope with the expanding trade

movement that Iraq is undergoing at present by virtue of construction and building processes. 2. Fix lifts and provide the port with cases for containers. 3. Provide spare parts for bridge lifts and cases.

4. Make it possible for the private sector to operate inside the port especially in terms of

unloading and loading containers.

Ministry of Transport and

Transportation


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Challenge: Office hours of ports and other border points are limited.

Objective: Extend office hours of ports and border points to operate round the clock.

Background: 1. The closing of business day for ports is 5:00 pm. Then, the port stops receiving shipments of goods and no loading or unloading

operations are done. This causes a negative impact on the rates of trade movement and handling of loading and unloading. This

increases the costs of transport for importers due to delay and payment of additional costs for the vessel carrying the goods. Delay

can be between 15-20 days.

2. The two border points in Safwan and Chalamcha operate from 9-5 pm. In both ports, the Iraqi trucks are not admitted into the

Kuwaiti territories to load imported goods, only the Kuwaiti trucks are admitted into the Iraqi territories. This results in additional

costs for the Iraqi traders.


1. Issue administrative instructions by the port‟s management to have a two shift working

day: one in the morning and the other at night so that the ports will be operating all day,

and even on official days for additional wages or incentives. This applies to border

points as well.

2. Create a joint area or yard on borders with the two countries in Safwan and Chalamcha

to facilitate the operations of shipment, unloading, importation, and exportation in line

with a mechanism to be set in coordination between the Ministry of Interior, the

Provincial Council, and the Chamber of Commerce in Basra and the relevant agencies in

both countries.

3. Conclude agreements with Kuwait and Iran to admit the Iraqi trucks into their territories

to load goods imported through those border points.


The Iraqi Ports‟ Company



Chamber of Commerce in Basra

The Iraqi Businessmen Federation in

Basra

Challenge: Only the public companies are permitted to issue licenses and have marine agents.

Objective: Make it possible for the private sector companies to provide marine agencies in order to increase the marine services

provided for commercial ships and encourage them to go to the Iraqi ports.

Background: Upon regulations by the Ministry of Transport and Transportation, the Marine Transport Company denies licensing to the private sector

offices to do marine agency jobs and marine freight brokerage. It does not permit those contracting with the marine carrier or the owner

of goods to provide the services of brokerage or agency for the marine freight. This also applies to the marine carrier agent, the

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owner/operator/charterer of the ship within the marine agency agreement concluded with any of them, or those who represent them

according to laws, bylaws, and regulations.


Make it possible for the private sector to open offices for the marine agencies that can be

classified into three major types: an agency for supplying food stuff and portion, an agency

for supplying fuel and drinking water, and an agency for general marine services. The agency

must have a technical certificate from the Marine Inspection Department at the Company of

Ports.


Iraqi Ports Company

Marine Transport Company

Challenge: Sinking objects due to recurrent wars

Objective: Remove large sunken objects from the marine transport canals

Background: Due to the recurrent wars of the former regime, there are about 80 sunken objects in the marine transport canals, which is

a factor of risk and it impedes the ships ability to enter the Iraqi ports. Therefore, the depths of the Iraqi waters are in poor shape and

have resulted in increased insurance costs for the ships transporting goods to the Iraqi market.

Propose Solutions Competent Authorities

1. Improve the performance of divers to be close to the international level, which is 12 meters. 2. Due to the presence of sunken objects in the mud, alluvial residuals, and damage of digging machines,

necessary steps need to be taken to deepen the marine canals so that ships can have access to Umm Qasr

and Khor AzZubeir ports. 3. Repair the handling equipment including forklifts and container cases.

4. Import new digging machines to remove the mud in the ports of Umm Qasr and Khor AzZubeir, Al-Faw,

Abu Flous and Al-Ma‟qal Port. This method was applied before the Iraqi-Iranian war in Shatt Al-Arab to

receive the commercial ships in Al-Ma‟qal Port after increasing its depths to more than 9 meters.

Ministry of Transport

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Challenge: Poor services provided for transporters at the land and marine borders.

Objective: Develop the operation of the ports to cope with the development of land transport.

Background: 1. The international border points of Iraq lack services provided for transporters, which results in delays and large losses they incur.

There are no refrigerated stores. As a result the imported goods, especially foodstuff, spoils and the recurrent power cutoffs cause

the computers to break down.

2. There are some administrative corruption cases that impede processing of applications and declarations of goods especially in the

Safwan exit.

3. The private transport companies operating at the marine ports including Umm Qasr lack the necessary services including

appropriate residences for unloading workers. In addition, there are no sanitary facilities provided for them.


1. Develop the operation of border points by establishing refrigerated stores according to

approved specifications and standards and provide the same with power generators to help

these points work all day long.

2. Provide relevant residences for the unloading workers and other services to facilitate

operation of private transport companies in the port.


Commission of Customs

Ministry of Transport

Challenge: High prices of fuel used for transport purposes.

Objective: Have the government subsidize fuel prices.

Background: Fuel for transport vehicles is sold at high prices. For example, one liter of gas oil sold by public stations costs ID 400 if

available. However, due to the severe shortage of fuel, most drivers are obligated to buy it on the black market for as much as double the

price.


The Ministry of Oil to establish special stations to provide fuel for trucks for subsidized governmental

prices in order to reduce costs of transportation. This will help transport companies and individuals with

low income as the transportation costs will be reduced. It will also reflect in the prices of foodstuff and

other goods.

Ministry of Oil


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Challenge: (i) High prices of fuel used for transport vehicles.

(ii) The lack of machines to calculate weight of loads on trucks.

Objective: Furnish ports with the machines used for calculating the weight of trucks at loading and unloading.

Background: Most of the ports do not have these machines used to calculate the weight of trucks before loading and then weighing

them again when loaded with goods to be shipped. This leaves such a calculation for the discretion of the employee and can be

inaccurate.


Providing all ports, through which the private transport companies pass, the machines to weigh trucks before and

after being loaded with goods in order to calculate the weight of goods. Public Company for Ports

Challenge: (i) High prices of fuel used for transport purposes.

(ii) Multiple and slow procedures implemented at the land border points between Arab countries and the multiple

documents used in customs processes.

Objective: Conclude customs agreements to facilitate land transport implemented by private sector operators between international

borders.

Background: 1. There are several and complicated procedures that have to be implemented by the private sector transporters due to the multiple

governmental agencies that are directly or indirectly involved in the transport process such as the Ministry of Interior, the

Ministry of Transport, and the Customs Department. Each agency issues its laws and bylaws that regulate their work without

observing the impact of such laws on the first party of the commercial process (the transporters) who have to comply with all the

laws and regulations that overlap and conflict sometimes.

2. The complicated and multiple customs and security inspection procedures at the border exits, in addition to their being so slow.

Often trucks are unloaded randomly and some parts of the trucks are dismantled by unskilled people. Moreover, trucks are

gathered at the border exit and are escorted by the security or customs units in the involved country. This delay and waiting might

take several days causing much confusion for the transporter.

3. Taxes, fines, and fees are plenty and multiple. They put a big load on the shoulders of transporters. They include the fees for

transit, fuel, entry, gathering trucks in one place, legalizing the declarations, entry visas for drivers, and fines imposed for delay

on trucks when exceeding their deadlines at the involved countries.

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1. Standardize the customs laws among Arab countries at the land borders and apply one approved law and issue one official document called “Single Transit Booklet” that includes all necessary data required from truck drivers and permit them to go through the international borders between Arab countries smoothly.

2. Open a “one-stop-shop” at the border points including representatives from all governmental agencies to help the transporter have all the required stamps, satisfactory information, and guidelines of sound and safe methods and procedures during transit. Trained and skilled employees must be appointed at the land borders to expedite the transit process and create an atmosphere of cooperation between employees and transporters.

3. Provide the land border centers with the electronic detectors instead of the traditional methods used at present. The system of gathering all trucks and having them wait must be ended. Have specialized technicians unload and dismantle the transport vehicles.

4. Unify fees and taxes under one title and reduce them. Laws and bylaws that complicate the transport processes must be unified among the countries. For example, a truck is now entering one country under certain standards and requirements, and then it goes to another country to face different standards and requirements that entail changing the loads, making it difficult to dispose of the additional load or change the vehicle specifications.

5. Some group agreements need to be created, mainly: a standardized agreement on technical specifications for vehicles operating in the international transport domain, an agreement in regard to licenses of driving and traffic, and another agreement on the border procedures for a prompt delivery.

Ministry of Foreign Affairs Ministry of Interior Ministry of Finance/ Public Commission of Customs Ministry of Trade Ministry of Transport and Transportation

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Fourth: Challenges and Aspirations The transport domain is very important for the private sector in Basra Province especially the marine transport sector, as Basra has the

only port in Iraq overlooking the Arab Gulf. Therefore the province is distinguished from other provinces in terms of trade through its

ports. However, the ports of Basra face multiple challenges and problems that affect the private sector‟s capacity to operate proficiently.

The lack of up to par technology at the ports is the largest challenge for the private sector in this respect. For example, the number and

quality of lifts, and cases used in loading and unloading the containers are low. Transporters suffer a lot from the long delay, which

forces them to pay bribes in order to accelerate the process. Moreover, the office hours are limited, which obstructs the ability to unload

shipments at the port efficiently. Other problems stem from the financial corruption. The transport sector, especially the marine

transport, is of great importance for the national economy. Investment in this sector is a rich source for the trade sector in future. Good

planning is required to provide a suitable environment to develop operation of the Iraqi ports by providing them with the latest state of

the art technology and up to date machines to cope with the emerging developments worldwide. Sophisticated electronic systems are

used in management in addition to shipment and unloading lifts in order to achieve competence and attract the marine transport fleets.

Many ports use new technologies in management and operation such as the Container Terminal Management System. This system

displays details of the ship and container traffic inside the port as it provides a real time control system. The Global Positioning System

(GPS) is used to locate places of containers automatically in order to control errors resulting from manual processes. These technologies

make it possible for the ports to implement their operations promptly and accurately, which helps reduce the costs of operating the

incoming ships.

These technologies assume a big role in reducing the waiting time, which results in more profit and decreased operational costs.

Therefore, prompt delivery of the port services help increase the operational competence of incoming ships and ports altogether. This is

an important indicator of the level of proficiency in the port compared to international marine transport. This encourages the ship owners

and marine companies to deal with ports that operate such technologies as regular liners. This helps increase the level of transactions. In

order to facilitate traffic of ships, many ports such as those of Dubai use the EDI technology instead of hard copy processing. This

technology is applied to the “pay plan,” which is an important plan which details information on goods that the ship carries. These

details include the locations, weights, numbers of containers on the ship and the types of goods in addition to information on the loading

and unloading ports where the ship will transit.

Electronic systems have also been useful in dealing with the imported and exported goods through the port. The electronic systems have

helped reduce the number of signatures to become only four in the ports of Dubai. By this, the time required to complete all the

procedures after unloading the goods till delivery has been reduced to two hours only. In some other ports in the Gulf, these signatures

count for 24 hours resulting in delayed delivery of goods of up to 10 days sometimes.

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Technological and administrative developments also are a factor when international marine transporters come to the country. These

transporters are now sending their ships to Dubai ports although there are other ports that are closer, such as the Port of Sultan Qabous in

Oman, which is 2-3 days at sea from Iraq. Therefore, Dubai ports deal now with more than 125 international marine transporters. Thus,

the geographic location advantage for the international marine routs are no more of big importance if the developed supplies and

technologies are not made available. These technologies are the main element to attract business to a port.

As for the private land transport sector, a national integrated plan must be sketched to develop and facilitate its operation to serve the

reconstruction process that the country is undergoing at present. Railways must be renewed to facilitate things for transporters of goods

from Basra to other provinces. A plan must be set to asphalt the main and vital roads by the local government unit and combat

corruption in this domain. Building of taxi or mini bus stations must be encouraged and established to provide transportation for citizens.

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The Private Banking Sector

Summary The private banking sector in Basra is still a relatively new and emerging sector. The first bank to be launched in Basra was the Private

Bank in 1993, later called the International Basra Bank for Investment. However, the private banking sector in Basra has witnessed a

remarkable development reflected in the increasing number of private banks and their branches, as well as the wide scale of their

banking operations. Still, the banking sector is suffering from several problems including limited paid up capital for these banks, or total

assets and liabilities due to the operation of these banks. They represent only a small rate of total activity of the whole banking structure

both public and private. The public banking sector is led by governmental banks such as Rafidain, Rashid and other banks. These banks

are not well managed compared with other banks in the neighboring countries. The banking sector in Basra still lacks substantial laws to

regulate the banking operation and transfers from and to Iraq. The Islamic banks do not do all the financial Islamic operations such as

speculation; they only do “Murabaha”2 transactions. These do not serve economic development effectively. In addition, the monetary

embargo on Iraq impedes the establishment of a developed banking industry with a real contribution to globalization and e-commerce.

In general, the banking sector in Basra is still strict in terms of lending to avoid any degree of risk. Difficult access to bank loans puts a

strain on small investors and businessmen. These banks are not willing to take chances with long term loans needed for a project, except

for perhaps in exchange for real estate guarantees. For this reason, small investors who account for the overwhelming majority in the

private sector have failed to benefit from the banking sector as they could not provide the required real estate collateral.

Introduction There is a group of banks that started in Basra, some of them established two decades ago. Some others were established in Baghdad or

other areas in Iraq and found Basra a suitable environment to grow. Some banks have made use of the renewed significance of Basra by

virtue of its geographic location and its closeness to the commercial, stock and financial markets in the Arab Gulf region. They

attempted to expand their scope of work to exceed other areas in the southern or central areas of Iraq. Expanding or developing the

banking system structure by expanding issuance of licenses to private banks in Iraq, in general and Basra in particular, falls within the

new directives of the monetary policy after 2003. It also contributes to the goal of expanding privatization including within the monetary

and financial domains. The monetary policy approved by the Central Bank is sketched, of course, to achieve a set of (known) objectives

including:

1. Contribute to the achievement of stable price levels.

2. Increase rates of employment.

3. Support economic growth development.

2 Murabaha is an Islamic banking method which entails the purchase of an item to the account of somebody and then recovers its value in installments with a profit.

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4. Combat the imbalance of the market, including safeguarding the exchange rate of the local currency from fluctuation.

Consequently, this issue requires coordination of economic policies including the monetary policy that the Central Bank of Iraq has been

responsible for in the aftermath of the political and economic changes taking place in Iraq. After the second quarter of 2003, the Central

Bank‟s monetary policies included supporting the banking sector in Iraq. The interest rates have been liberated and banks have been

given the freedom to identify the interest rates according to the market mechanisms. Licenses of profession were also issued to some

Arab and foreign banks.

The Banking Sector in Basra includes the branch of the Central Bank of Iraq, the Rafidain and Rashid banks‟ branches in addition to

branches of other specialized governmental banks including: the Industrial Bank, Real Estate Bank, Cooperative Agricultural Bank, and

Trade Bank of Iraq.

For more than forty years since the resolutions to nationalize the industrial and banking sectors in 1964, banking operations were limited

to the public sector. Thus, the first private bank to emerge in Basra was the Private Bank of Basra in 1993 (later the International Bank

of Basra for Investment). In 2008, the number of private banks included 16 licensed banks as follows:

1. Baghdad Bank

2. The International Bank of Basra for Investment

3. The Iraqi Credit Bank

4. Al-Warka‟ Bank for Investment and Finance

5. Middle East Iraqi Bank for Investment

6. The Islamic Iraqi Bank

7. The Commercial Gulf Bank

8. Trade Bank of Iraq

9. Dar AsSalam Bank for Investment

10. Eilaf Islamic Bank

11. The Economic Bank for Investment and Finance

12. The Regional Islamic Cooperation Bank

13. Al-Bilad Islamic Bank

14. The Iraqi Credit Bank

15. The Iraqi Bank for Trade

16. The Iraqi Bank for Investment

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Expansion continued in 2009 with 20 new banks obtaining a professional license. Total paid up capital of private banks for 2006 reached

74% of total paid up capital of the Iraqi banking system. In 2007, this rate increased to 81%, which is a substantial change. However, the

rate of assets and liabilities for 2006 did not increase; it was 1.3% compared with governmental banks (namely, Rafidain, which ranked

first although it indicates an extensive presence and concentration of the Rafidain Bank). It is not an independent indicator to success.

The Trade Bank of Iraq and Basra Trade Bank rank on top of the list of banks with paid up capital. Al-Warka‟ Bank and Middle East

Iraqi Bank for Investment ranked first in terms of assets and liabilities by virtue of expansions that these banks introduced through

opening new branches all over Iraq.

In the meantime, the main banking activity of lending did not witness any tangible development for various reasons. The interest rates

set by the Central Bank of Iraq is an obvious indicator to the fact that the Iraqi monetary policy is a shrinking one, which forces the

banks to reduce credit due to high interest rates. Clearly, this policy was made to withdraw the local liquidity in Iraqi Dinar (interest of

overnight interest and other tools). Therefore, commercial banks cannot lend to their clients as the Central Bank provides a profitable

investment as it places its money at these banks and gets the best interest. This policy is subjected to another pressure from the Central

Bank-- that is reduction of liquidity rate at banks from 84.5% in 2003 to 16.7% in 2004 and then to an average of 11.8% in 2006. This

status remained in 2007 and early 2008 when this procedure proved to be a weak one with negative impacts. The rates of liquidity were

changed in March of this year by reducing the legal reserve rates to 25%, which provided an open legal framework to promote credit.

First: Attributes of the Private Banking Sector in Basra

1. Limited paid up capital of these banks or limited total assets and liabilities due to the transactions of these banks. They account

for a lower rate of total activity of total private and public banking structure where the governmental banks including Rafidain,

Rashid and other specialized banks rank on top.

2. Private banks and even public banks are not well automated compared with similar banks in neighboring countries.

3. Individuals are still reluctant to deal with the banks. For instance, they‟d go to a bank to receive their salaries especially pension

dues.

4. Islamic banks do not do all the Islamic financial transactions such as “Mudaraba”; their role is still limited to Murabaha which

does not serve the economic development in an effective manner.

Second: Partners participating in the Profile

1. Private banks operating in Basra

2. The Center of the South to Develop the Iraqi Economy

3. Businessmen Federation- Basra Branch

4. Experts (Consultants) in the Banking Sector

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5. Several outstanding businessmen

Third: Challenges and Proposed Solutions

Challenge: The limited structure of the private banking system.

Objective: Increasing number of banks and their branches in Basra

Background:

1. Private banks operating in Basra currently account for 20 out of 42 private banks in Iraq. This is due to the fact that Basra is a

commercial and industrial city and has the only sea port of Iraq.

2. Most of the private banks are either full or partial family businesses, thus the rate of public shareholding in them is low. Most of

these banks were established outside Iraq except for Basra Trade Bank, the headquarters of which is seated in Basra.

3. Most of the private banks and their branches are concentrated in Basra center except for some few which have branches in

AzZubeir District. Rural areas do not have such banks.

Challenge: Banking activities provided by private banks are not strong. Objective: Expand and diversify the banking services base.

Background:

1. Most of the private banks deliver poor finance, credit services and transfers in foreign currency (the US dollar, particularly) due to

the limited legal framework that regulates this procedure, in addition to the fluctuating prices of the Iraqi Dinar against foreign

currencies and Dollar against the main international currencies.


1. Increasing presence of the banking sector in Basra being the city of oil, ports, and international trade. 2. Diversify the capital base of these banks by recapitalizing them and listing their shares on the Stock

Market even if in Baghdad, as Basra still does not have a stock exchange.

3. Openness to the rural areas as an attempt to serve them and in the same time increase the number of

clients.

Commercial Private Banks in

Basra

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2. Most of the banks do not perform financial investment activities due to the lack of a Stock Exchange in Basra. Even the Baghdad

Stock Exchange still lacks the basic infrastructure and relevant automation as is the case with the international stock exchanges

that are known for prompt performance and service.

3. Islamic banks deliver Islamic banking services only according to the “Murabaha” method, which makes them unable to achieve

an economic formula that can serve economic development.

4. Governmental institutions direct most of their deposits and dealings to the public banks, thereby depriving the private banks from

a large portion of deals that help increase their volume of operation.


1. The government must expand its dealings with the private banks. 2. Openness to international banking services, including those provided by neighboring countries)

to help serve clients better 3. Expand the business base between the monetary and financial markets.

Ministry of Finance and the

Central Bank

Private Commercial Banks in

Basra

Challenge: The poor infrastructure of the private commercial banks.

Objective: Develop the infrastructure including buildings, offices, communication tools, messaging, and e-banking services.

Background: 1. Most of the private banks occupy either rented or privately owned buildings that were formerly housing units. They are not built

to accommodate banking activities or commercial service activities.

2. Furniture that these banks possess is old and does not reflect a nice image of these banks.

3. Equipment and tools, such as computers, used for counting or detecting forgery are few and in need of upgrading.

4. Most banks do not operate the ATM service, it is only Al-Warka‟ Bank which uses it and to a limited extent.

5. Most of the employees who use such equipment are from those holding preparatory school qualifications (they didn‟t take

developmental courses).

6. Most banks do not have an intranet service to control work between the headquarters and the branches.

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1. Develop infrastructure of banks by providing them with physical inputs even if with the assistance of the

Central Bank upon a governmental finance plan for banks. Standards must be set for this purpose given the

important contribution of banks, including the private banks, to development. 2. The Ministry of Finance to finance a program to train the human resource personnel of banks, including the

private ones. This can be partly paid for by imposing a certain tariff on these banks to join such programs.

When a program becomes a success story, only a small portion of money will be taken.

Ministry of Finance

The Central Bank of Iraq

Private Commercial Banks

Challenge: Continuous inflation.

Objective: Achieve monetary stability using the monetary policy tools.

Background: 1. Bottlenecks on the production side, especially in terms of providing the country with fuel and power supply, has negatively

resulted in increasing the transportation costs.

2. The large impact of the macro demand or total expenditure on goods and services due to the increase in current expenses.


1. Change procedures of the monetary policy to control inflation including the increase of

interest rates and exchange rate of the Iraqi Dinar, or at least maintain stable exchange rates.

The Central Bank has already made these procedures.

2. A package of procedures of the fiscal, commercial, and economic procedures in line with the

monetary policy. No such package has been introduced so far. 3. Develop effective methods to increase the influence of fiscal policy on the economics in the

province.

The executive authority at the Cabinet

assigned with the task of

implementing the economic policies

Ministry of Finance


Challenge: High interest rates of banks.

Objective: Reduce interest rates to promote credit.

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Background:

1. The interest paid by the Central Bank to the commercial banks for their deposits used to be 20% in 2007. Then, 18% in 2008

until decreased to 16%. In the aftermath of the international financial crisis, this rate reached 14%.

2. Interests of bank deposits for the commercial banks are not in line with that of the Central Bank. The rate ranged from 6% to

10% for 2006-2007 respectively for saving, and 7.7%-12.3% for 2006-2007 respectively for a one year deposit. Therefore, the

difference is large between the two rates for the individual deposits and the commercial bank deposits placed at the Central

Bank.

3. Credit is low because the commercial banks place their deposits in the Central Bank, which helps them achieve great benefits

and makes use of this important monetary tool to avoid risky credit, while having their deposits at the Central Bank guaranteed

by the State.


1. Decrease the interest rate of the Central Bank to become at a more realistic level and not use the

high interest rate as a tool to absorb cash liquidity. Iraq originally suffers from a severely weak and

distorted infrastructure. As such, it requires a large volume of investment, and unrealistic interest

rates will be in vain. The investment in infrastructure will be a testament to the effectiveness of the

monetary policy implemented.

2. Introduce a package of procedures under the monetary policy in parallel to interest rates that can

serve the objectives to be achieved.

3. Urge the commercial banks to deliver credit services to clients in line with economic development.

3


Commercial Banks

Challenge: Liquidity rates for the commercial banks were low in the past years.

Objective: Increase the liquidity rates in line with the core banking services delivered by the commercial banks.

Background: 1. The liquidity rates used to be very high in 2003 (the year of war and regime change). This was clear before replacing the

currency with the current one and the procedures made afterwards to control liquidity (84.5%) in 2003 (See the Table of

Liquidity Rates)

2. For the years 2004-2006, the liquidity rates dropped very much until they reached 16.7% in 2004, then 10.1% in 2005. They

began to increase again to 10.8% in 2006 and continued as such until 2007 and the first quarter of 2008, equaling approximately

99

10% until the resolution of the Central Bank of Iraq was issued to decrease the legal reserve rate to 25%; which means a release

of liquidity.

3. Core banking operations of the commercial banks changed from credit to making use of the monetary policy tools for deposits

at the Central Bank and overnight investment due to the low liquidity at the commercial banks and other reasons.


1. Increase the rate of liquidity to be at more realistic levels (the current rate is at 75%).

2. Develop and update the operation of banks in line with diversified credit services to the clients.

3. Put in force the self and external control procedures on banks to avoid any problems with credit

(which the commercial banks originally suffer from such as bad debts of Basra Trade Bank).

4. The monetary authority must make the required effort to help banks that suffer from problems of

borrowers not paying back loans, as there is no fixed asset mortgage. A mortgage against a car is not

a fixed asset and cannot be approved. The State must take responsibility in this respect.


Commercial Banks


Ministry of Justice

Ministry of Finance

Challenge: Poor training and practices of employees at the private banks.

Objective: Develop the human resources working at the private banks.

Background: 1. Graduates of the educational process going to work for banks are not well trained (in practice). They do not possess skills because

the linkage between the university and the educational institutions at all stages and the banks is broken.

2. The training programs at the Banking Institute in Baghdad are very much limited and are not sufficient to delegate employees from

provinces including Basra for training.

3. Private banks do not put effort to provide their employees with training; rather they usually recruit those who already have the

required experience and qualification.

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1. Maintain linkage of ongoing education between universities and preparatory schools that

teach the necessary skills in order to prepare their staff, who may also be called to conduct

trainings for current bank staff. 2. Have the Central Bank restore its role of training the banking staff whether in the southern

region in Basra or in the headquarters in Baghdad. 3. The testing system must be applied to ensure staff is qualified, as it used to operate in the

Iraqi State in the past. This requires the staff to learn and have more theoretical and practical

training to pass the required examinations. 4. Increase salaries of employees at the private banks to equal or even exceed salaries of their

peers in the public banks in order to promote creativity and serious work.

5. Recruit young people with scientific, administrative, and technical skills to work for the

private banks instead of relying on the group of government pensioners even if they are well

experienced.


University of Basra and Technical

Institutes

Private banks

Department of Education of

Basra/ Preparatory schools

teaching the commercial stream

Challenge: No stock exchange is found in Basra.

Objective: Open a stock exchange in Basra to revive the banking and financial operations as well as other advantages of the economic

activity.

Background:

1. A stock exchange is found only in Baghdad and it is in need of state of the art technologies to operate.

2. Banking operations of the private sector are limited to the foreign exchange market (USD purchase/selling) and purchase of

treasury bills due to their strong guarantee rather than indirect investment in shares or development of options and futures.

3. Shareholding companies already exist in the Basra market or are still emerging. They still lack the secondary market of dealing-

- they only have the primary issue market.

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1. The Central Bank/Basra must open a stock exchange and devolve legal, administrative, and

financial procedures for this purpose. It must be seen as a guide and a partner for the private sector

in this respect. 2. Baghdad Stock Exchange must support the opening of a branch in Basra, which will be another

advantage for it as it will expand geographically. 3. In cooperation with other ministries, have the Ministry of Finance lease or allocate a special

building for Basra Stock Exchange.

Ministry of Finance

Ministry of Municipalities

Central Bank of Iraq (Southern

District Directorate)

Local Government Unit in Basra


Industrial figures and businessmen

Challenge: The public still lacks a banking culture.

Objective: Develop the banking culture among the public.

Challenge: 1. The public and private bank employees are not well qualified and this is due to recruiting people who do not have any background in

this field.

2. The Iraqi society is accustomed to cash dealings. Financial securities‟ dealings are very rare and poor.

3. The academic education institutions and the civil society organizations do not emphasize educating people to develop banking

culture and dealings.

4. The bad security conditions have been so critical during the past year and affected the public trust in the banking system so much

that people prefer to keep their savings elsewhere besides the banks.


1. Encourage public and private institutions to accept dealings with checks and other alternative

payment methods.

2. Encourage the e-government facility to ensure the legal and procedural aspect as well as

deregulation and abolishing the red tape whenever possible. 3. The private banking system must be open to the banking experiences and applications in other

countries. Private banks must bear some of the costs in this respect, taking into consideration

advantages achieved for the private banking system.


The Public and Private Banks

Local Government Unit in Basra

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Challenge: The lack of important laws to govern the banking operation.

Objective: Enact laws to help develop banking in the face of the globalization challenges and other developments of the era.

Background: 1. There are no laws to regulate credit card issuance in Iraq. Procedures made by some private banks to develop their banking

services are still in need of a legal framework (Al-Warka and others).

2. There are no relevant laws to cope with the developments in cash transfers. The Iraqi law in practice at present stipulates that

no check for the amount of more than USD 10,000 can be admitted. Thus, the clients have opted to deal with the official and

non-official companies that operate without a legal framework.

3. There are risks of money laundering through some neighboring and other countries. This money is often generated from drugs

or terrorist acts. In fact, these risks are present due to the failure to implement deterrent legal and administrative procedures,

despite the fact that the Law of Anti Money Laundering was enacted in 2004.


1. Those in charge at the government departments, especially the Central Bank of Iraq

and the Ministry of Finance, have submitted a series of draft laws to the legislature

including a development of the legal framework regulating the banking operations in

and outside Iraq. These cover the transfer of money from and to Iraq, and the volume

and sources of such money in line with the development of banking operations all

over the world.

2. The role of integrity and inspection agencies and the Audit Bureau must be enforced

to supervise the banking operations. 3. Until a package of regulatory laws are issued in this respect, the Ministry of Finance

and the Central Bank of Iraq must issue a series of resolutions, even if on a

provisional basis, to help provide a relevant legal framework for the operations that

are not put into a legal context at present.


Supervisory agencies (Audit Bureau,

Inspector General, Integrity …etc)

Customs and Border Forces

Security organs of the Ministry of

Interior and the Ministry of Defense

Challenge: Administrative procedures barring the interaction between the Central Bank and private commercial banks.

Objective: Facilitate and develop administrative procedures and communication channels between the Central Bank and private banks,

making use of modern technologies.

Background:

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1. Commercial banks face problems in transferring money to the Central Bank of Iraq (overnight investment) as the procedures

are slow and cash amounts are paid for transfer.

2. Decision making process at the Central Bank is centralized (at the headquarters); there is no authorization given to branches.

3. Clearance procedures between (and among) commercial banks are still not developed (three days to be completed) although

there is a clearance committee expected to deliver more promptly on this issue.

4. Commercial banks lack transparent inter-dealings. This applies to their dealings with the public who do not review the banks‟

accounts with the pretext of confidentiality. This should not be the case, transparency is required and procedures are legally

stipulated but are not being observed.


1- Have the Clearance Committee facilitate the clearance procedures among banks.

2- Operate modern technologies to the extent possible in line with technical standards of

communication as mutually agreed upon between the banks and the Central Bank in order

to achieve the highest degree of security. These banks must be interconnected with special

networks and not only the internet. 3- The principle of transparency and disclosure of final statements of accounts must be applied

in order to keep the public posted.


(Headquarters and Branches)

Supervisory agencies including the

Audit Bureau, the Inspector

General and Integrity

Ministries of Justice and Interior

and their departments

Challenge: The monetary embargo is still imposed on Iraq

Objective: Alternative procedures must be made to get rid of the monetary embargo

Background: 1- The monetary embargo has been in effect since the second gulf war (after Kuwait evasion). This embargo applies to the Central

Bank of Iraq and Rafidain Bank with all its branches worldwide. The Iraqi banks are still under this negative impact.

2- As a result, commercial banks cannot open documentary Letters of Credit.

3- Since that time, the insurance coverage is not provided for banks and their clientele.

4- Banks cannot open branches for them in other countries unless through an agent.

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1- Provisional alternative procedures must be approved. Recently agreements have been concluded to

have the National Bank of Kuwait and the Iranian Cooperative Agriculture Bank act as agents. 2- Sketch a scenario for the public and private banking system structure inside and outside Iraq. This

scenario will not be binding for the private banks. This scenario must cope with the removal of

monetary embargo, upon a resolution by the International Security Council. 3- Introduce new elements of the banking operation, those which were in operation, but the banking

system lost them due to the embargo. For instance, specialized banks to support non-oil exports and

exporters must be established.


Ministry of Finance

Ministry of Trade

Central Bank of Iraq

Fifth: Challenges and Aspirations:

The role of a monetary policy including the banking system in the private sector helps the development of the monetary policy of the

country and achieves goals of development. Statistics available on the private banks show that they are still emerging in Iraq, although

they possess the majority paid up capital compared to the public banks. However, the public banks are still holding most of the assets or

liabilities of the banking structure. They are distinct for their expansive activities and the large number of their branches all over Iraq

compared with private banks. Public banks hold about 96% of total deposits in the banking system although the private banks are known

for increasing credit activity and more vitality compared with the public banks.

The main challenges for this sector in Basra include the low number of private banks in the province and throughout Iraq, the

deteriorated banking tools in dealing with clientele, limited capital, seeking prompt profit, the lack of a stock exchange in Basra, and the

staff‟s general lack of required experience.

A comparison among 14 banks in the province shows that the Trade Bank of Iraq and Basra Bank hold the largest portion of the paid up

capital. However, Al-Warka‟ Bank holds one fifth of the assets and liabilities for all banks in the sample. This deterioration of the

private Iraqi banks is attributed to several reasons that have been highlighted along with the proposed solutions to help reform the

banking sector. This reform entails creating the relevant environment for the private banking sector to start operation according to

banking best practices. These banks must be active in delivering bank facilities for citizens at reasonable rates. Banks must be

restructured to be on equal footing with similar banks in other countries given the fact that these banks operate in a core city for the

economy of Iraq, one that embraces the only sea port of Iraq.

Documents

Agenda of Basra Province English... · 3- Chamber of Commerce of Basra 10- Society of Tomato Producers in AzZubeir 4- The Iraqi Society to Defend Consumer Rights 11- Fisherman Society