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CHAPTER - IV
ECONOMIC DEVELOPMENT
The main thrust of this chapter is on the overall economic
development in Iraq, especially after the takeover by the
Ba'th Party. Oil has played a vital role in the economy of
the country but the Ba'th rgime has laid special emphasis on
the development of industries and agriculture sectors, too.
This chapter also aims at examining in detail the role
played by oil sector in enhancing the state's resources
which were subsequently used for the industrilization and
the development of agricultural sector.
1. INTRODUCTION
Although the coup brought the Ba~th party back to power in
July 1968 yet it was not popular in many quarters because of
its reign of murder, torture and terror in 1963 when it
shared power for a brief period. However, the difference was
that in its second term, the Ba'th party enjoyed complete
control over the State apparatus as well as military.
Inspite of its claim, the Ba'th was not committed to
~building socialism' or to the radical transformation of
130
existing relations of production. On the contrary it was
interested in maintaining the existing capitalist economic
order. 1 However, the leaders realized that they could only
establish themselves permanently within the State if they
were able to reach out and appeal to the more politically
conscious popular forces on much wider scale. In order to
fulfil this, they presented their rule as representating the
common will' and as serving the interests of the nation as
a whole. For this purpose, the ~doctrine of Arab Socialism',
which advocated social harmony and national solidarity
~among the Arab masses' was found to be particularly
suitable. 2
To pursue its goals, the Ba~th used the State's vast
oil revenues to the domestic market and used part of the new
wealth to establish the infrastructure needed to support its
development projects. Unlike most other Third World
countries, Iraq's wealth was capable enough to sustain a
distributive welfare state system and, at the same time,
1. Marion Farouk-Sluglett and Peter sluglett, Irag Since 1958: From Revolution to Dictatorship (London: KPI, 1987), p. 228.
2. Marion Farouk-Sluglett and Peter Sluglett, "Iraqi Ba' thism :Nationalism, Socialism and National Socialism", in CARDRI, (Campaign Against Repression and for Democratic Right in Iraq), Saddam' s I rag: Revolution or Reaction (London, 1986), p. 210.
131
supporting the capitalisation of private and public
enter p r i s e s . In t hi s way i t was a b 1 e to provide
opportunities for social and economic advancement for many
sections of the middle class and even to offer the
possibility of social and economic incorporation and
advancement to groups that had hitherto existed only on the
margins of society, such as the urban poor and the rural
migrants. 3
It should be noted that the old regimes had been
attacked by their critics for the slow pace and neglect of
development programmes. The regime•s dependence on foreign
oil companies for their revenue was resented. Their neglect
of industry and emphasis on agriculture, which benefited
primarily the landed classes was criticised. Their
disregard of the country•s human resources, and the gross
misuse of wealth that had resulted from the malfunctioning
of the free enterprise system were all points of criticism. 4
However, it can•t be claimed that old regimes were failed on
all accounts. They gained substantial growth in agricultural
outputs, mainly through private enterprises and had made a
3. Farouk-Sluglett and Sluglett, n.1, p. 230.
4. Phebe Marr, The Modern History of Iraq (London: Westview Press, 1985), p. 247.
132
good start in building the country's infrastructure.
The revolutionary regimes tried to belittle these
achievements and set forth contrasting developmental aims.
Significantly, all the regimes in power opposed foreign
domination and control of the economy. They all demanded
accelerated pace of industrial development. Moreover, they
favoured socialism over laissez-faire economies.
How far the Ba'th party could accomplish these aims?
What factors favoured it in achieving these goals? How could
they successfully challenge the foreign domination of Iraqi
economy? are some of the questions which need to be
answered. Indeed, the Ba'th party succeeded in removing the
landlords and wealthy urban entrepreneurs, in nationalizing
foreign companies and in reversing the pattern of
stagnation, at least in urban areas. It also increased the
pace of development with the help of massive investment,
particularly in industry.
As a matter of fact, the Ba'th regime got tremendous
amount of support through increased oil revenues in
implementing a consistent pattern of investment in a
clearly specified direction. However, the Ba'th regime
failed to solve numerous problems. Changes in the economic
structure had never been remarkable despite attempts at
industrialization, and most of its economic growth had been
133
invested for the purpose of public administration and
defence, rather than in industry and service sector. Nor did
the new regime succeed in diversifying the economy as the
country's economy still revolved around oil. Four major
sectors may be singled out as the most important ones for
our discussion, namely, the oil sector, the industrial
sector, agriculture and defence.
2. OIL SECTOR
Given the paramount role of oil within the Iraqi
economy, the extent of the impact of the nationalization of
Iraqi Petroleum Company, in June 1972, can hardly be over
estimated, either in political or in economic fields. In
fact, before the Ba'th party carne to power in 1968, it had
called for nationalization of the oil industry, epitomized
in the slogan, "Arab oil for the Arabs". Although several
vital preparatory steps had been taken for the last couple
of years, the Ba'th party claimed that the nationalization
meant that the Ba'th was now in total control of the
country's principal economic asset, a kind of independence
and also confidence never enjoyed by its predecessors.
The extent of the State's new economic might, as
compared to the situation in the past is shown by the oil
production figures in Table 2. Production nearly doubled in
134
ten years, from 1.322 mb/d in 1965 to 2.262 mb/d in 1975.
The rapid price increase meant that the rise in revenues too
was much greater. Since these revenues constituted the most
important component of the country's national income and the
GDP, it would be useful to try to evaluate them against
this background. As Table 3 illustrates, national income
doubled from ID (Iraqi Dinar) 1,412.1 million in 1973
(itself a tremendous increase on the averages for the 1950s
and 1960s) to ID (Iraqi Dinar) 3,002.5 million just in the
span of one year. It tripled within the next two years, to
ID 4,478.8 million in 1976. The GDP and per capita income
increased at a corresponding rate, implying a similar rapid
rise in demand for consumer goods of all kinds and the
expansion of the home market.
1950
0.136
TABLE 2
Oil Production in Million of Barrels Per Day
1965
1.322 1975
2.262 1979
3.477
1980
2.514
1983
0.922
1990
2.01
1992
3.0
Sources:
1 .
2 .
*
Exxon Background Series, "Middle East Oil and Gas", December 1984, p.12, as quoted in Farouk-Sluglett and Sluglett, n.1, p.231. Middle East and North Africa. 1995, (London: Europa Publications Ltd., 1995), p.489. In 1979 oil exports average ca. 3.3 million b/d, an increase of one third over 1978, in an attempt to affect the lower level of Iranian exports.
135
TABLE 3
GDP, National Income and Per Capita Income at Current Prices, 1957-76, 1982
Year
1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1979 1982
Per Capita Income in ID
89.6 96.9 98.4
103.9 110.9 115.8 135.5 278.9 337.2 387.2 825.9 874.2
National Income GDP in ID in ID Million Million
754.2 937.7 840.6 1,062.6 897.2 1,103.3 956.9 1,197.3
1,081.3 1,375.0 1,166.9 1,388.8 1,412.1 1,587.5 3,002.5 3,347.7 3,750.5 3,970.5 4,478.8 4,582.8
10,588.5 4,714.2 12,334.6 5,374.5
Source: Government of Iraq, Annual Abstracts of Statistics (AAS), 1977, p.128; AAS, 1984, pp.119-124, as quoted in Farouk-Sluglett and Sluglett, n.1, p.232.
The enormous expenditures on the part of the State had
the effect of making it the principal customer for goods and
services within the economy. As a result, majority of the
various development projects set in motion were carried out
by private companies, both foreign and domestic. The State
thereby acted as the 'generator' for the accumulation of
private captital. In consequence, the regime provided fairly
good 'opportunities' for instant enrichment and the
accumulation of wealth, thus contributing to and
136
facilitating the rapid transformation of Iraqi society. 5
This finally led to a situation where the market became a
significant determinant of the regime's economic and various
other policies.
At the time when war with Iran broke out in September
1980, many major oil and gas development projects were in
progress in Iraq. However, the war damages were not as
extensive as were originally believed, despite the Basra
Petroleum refinery, with a capacity of 140,000 b/d, being
bombed in the initial stage of the war. Repair works began
in 1988, and by mid-1989 the refinery was again producing
oil products for exports. 6
Iraq has been one of the founder-members of the
Organization of the Petroleum Exporting Countries (OPEC) . It
was not required to make a reduction in its output in 1984,
when OPEC cut oil production by 1.5 m b/d in order to
prevent a further fall in prices in the world market, which
was over supplied with oil. Iraq frequently demanded for an
increase in its OPEC production quota while at the same time
5. !sam al-Khafaji, al Dawla wal-Talatawwur al-Ra'smali fil- 'Iraq, 1968-1978 [The State and Capitalist Development in Iraq] (Cairo, 1983), pp.102-03.
6. The Middle East and North Africa 1995 (London: Europa Publications Ltd., 1995), p.488.
137
consistently exceeding its allocation. During 1986, oil
prices continued to decline, falling below $10 per barrel by
the month of July. When, in August 1986, the OPEC decided to
reduce production to a maximum 16.7 m b/d for two months
from 1 September 1986, effectively reverting to the quota
restriction imposed in October 1984 in order to raise oil
prices, Iraq declined to follow this decision, demanding
parity with Iran, and carried on to produce as much as it
required to finance its war-effort. 7
After the cease-fire in the Iran-Iraq war came into
effect, Iraq sought to maximize its oil revenves and to
raise the OPEC minimum reference prices to reconstruct its
economy, as it was still heavily dependent on the oil
sector. Despite the ~ceiling' allocated to various members
of OPEC, over-production continued, and by the end of 1989
the total OPEC output had risen to almost 24 m b/d, with a
resulting depressive effect on world oil prices. This over
production continued to such an extent that increasing
number of tankers were being chartered for floating storage
by May 1990. Later, in June 1990, the Iraqi Deputy Prime
Minister, Dr Saadun Hammadi, condemned Kuwait and the UAE
7. ibid, p.489.
138
for producing more oil than their quota levels, and claimed
that as a result of this over-production, Iraq was losing
$1000 million annually. 8 President Saddam Husain initially
warned of action against Kuwait which eventually followed by
annexation of Kuwait by Iraq at the beginning of August
1990.
Faced with the UN embargo at present, and the closure
of its pipeline outlets through Saudi Arabia and Turkey,
Iraq reduced its oil production to less than 400,000 b~rrel
per day (b/d) in the later months of 1990, just sufficient
to supply its domestic refining capacity. However, by mid-
1992 Iraq appeared to have made substantial progress in
restoring its oil-production, refining and storage capacity,
in accordance with the priorities laid down in the
reconstruction plan. Annual average oil production
(including natural gas liquids) rose from 235,000 b/d in
1991 to 480,000 b/d in 1990. Its production level of over 3m
b/d (before the August 1990 invasion of Kuwait) output
averaged 495,000 b/d in 1993 and 550,000 b/d in the first
half of 1994.9
8. ibid, p.489.
9. ibid, p.489
139
For almost the past five decades, Iraq's economic
development had been gathering momentum on the basis of its
oil earnings. Oil revenues helped substantially the
transformation of the Iraqi economy from a self-sustaining
low-equilibrium system in the early 1940s into an export
oriented, fast growing dual economy in the 1970s and early
1980s. It is obvious that the "oil-boom" which began with
the quadrupling of the world price of crude oil in 1973 has
proved to be of great benefit for Iraq. Basically Iraq's
economic progress had been hampered in 1950s and 1960s
because of chronic balance of payments problems. But the oil
revenue inflows from 1973 and 1979 were very large. As a
result of the rapid economic growth, and thereby the living
standards of the Iraqi population improved considerably.
However, there were also some growing inequalities.
Besides the balance-of-payments constraint, the
country's development suffered due to lack of capital; no
country has been able to grow substantially without
sufficient physical and human capital. Building capital
takes time as this is not an overnight phenomenon, but Iraq
has been fortunate to generate abundant savings from oil
revenues that enhanced the investible surplus with almost no
sacrifice of consumption.
140
TABLE 4
Share of Oil Revenues in National Income, GDP, Investment Budgets and Current Budget for Selected Years 1960-1980
Percentage of oil revenues in:
Year
1960 1965 1970 1972 1973 1975 1980
National GDP Income
14 13.0 23 25.8 23 22.4 34 23.6 40 34.1 r.., rr'\ 1'\ O.J.. OU.U
84 83.9
Investment Budget
100 91 87 80 93
~ "" J..UU
100
Current Budget
45 38 39 32 67 81 76
Sources: ECWA/UNIDO, Industrial Development in Irag: Prospects and Problems, vol.1, (September, 1979), 4, and International Monetary Fund, International Financial Statistics (various issues) .
3. INDUSTRIALIZATION
After 1958, General Abdul Karim Qasim, the then President of
Iraq, embarked on a new economic policy for the country
which aimed at industrial expansion. But except in the oil
industry, the country could not march much ahead. When the
Ba'th party came to power in 1968, being socialist in
na t u r e , i t p 1 anne d t o t ran s f or m the c o u n t r y f rom a
capitalist or rather a semi-capitalist (some steps had
already taken toward socialism in the mid··1960s), to
primarily a socialist economy. At the same time the Ba'th,
was aware that a quick transformation to total socialism was
141
neither possible nor desirable, although extremist quarters
had demanded a full transformation into a socialist society.
Taking into consideration the prevailing factors and
compulsions, the Ba'th party decided to provide a private
sector, though a small one, for private investors. A mixed
sector, was also provided in which the private and public
sectors could cooperate and serve as a link between private
and public ownership. 10
The Ba'th regime did not move at once on new projects.
It first tried to work over raising of the productivity of
existing projects. For instance, the plan for the glass and
textile factories were laid down under the Qasim regime but
was not completed until additional funds were provided
either to complete or to extend these projects. The paper
mill, designed in 1966 under the Arif regime, remained
incomplete till 1974. The Ba'th party, however, took the
10. The idea of providing a public sector vis-a-vis private sector was first came into discussion by Qasim's advisors after the Revolution and an Agreement of Economic Cooperation was also signed with the Soviet Union in 1959. When Arif took over Qasim as President, the public sector was enlarged considerably but could not surpass the private sector, as latter continued to play a dominant role in Iraq's economy. However, assuming power by the Ba'th party, the public sector became the foundation of the country's economy. For a gener.al statement of the Ba'th Economic Policy, see Regional command, The Political Report of the Eighth Congress of the Regional Command (Baghdad: Government Press, 1974), pp.66-80 and 114-40.
142
initiative to complete it, since the need of paper for
domestic consumption had increased. Similarly, some other
factories, such as those of steel, sulphur and sugar, too
were only completed after the Ba'th tookover, although plans
for their establishment had been prepared by former regimes.
In order to implement these projects effectively, the
government emphasised planning as a method to achieve the
development. Indeed, planning distinguished the Ba'th
programmes from those of its predecessors. 11
In fact, expenditures on industry rose sharply during
the National Development Plan of 1971-75, which marked an
important step in the country's industrial development. This
five year plan, aided not only by huge amount of revenues
available with the government but also by the promulgation
of legislation saw rapid project implementation in these
sectors. The new law provided immunity for development
projects from regulations governing import of goods and
services and employment of labour. Industrial projects
included in the plan were the main items in the list of
projects given special status under the new law. 12 Apart
11. Ministry of Planning, Progress Under Planning, (Baghdad: Government Press, 1971), p.7.
12. Law 157 of 1973.
143
from that, the incomplete projects, such as Petro chemical,
textile and sugar industries, were further expanded and
special care had been taken to complete them as early as
possible.
The foremost goal of industrialization was not only to
speed up industrial development but, probably more
important, to correlate industrial development with
agricultural development, and to take special care for the
industries which were regarded important for domestic
markets. Only in industries such as cement, vegetable oils
and petrochemicals, which Iraq could possibly export to its
neighbours, did the plan stress possible expansion. The
ultimate objective of industrialization was to achieve self-
sufficiency and ensure the country's economic
independence.13
The 1970-75 Development Plan introduced by the Ba'th
regime was aimed to promote an even faster rate of
industrial investment, resulting in a 75 per cent increase
in value-added manufacturing between 1969 and 1974, or a 12
per cent increase in annual rate of growth. Financial
13. Ministry of Industry and Minerals, Strategy of Industrial Development in !rag (Baghdad, 1976), pp.24-36 (This study was prepared originally in Arabic under the title, Istratijiat al-Tanmiya al-Sina'iya fi alIraq.
144
implementation was quick and between 1971 and 1975, 85 per
cent of the total allocation for industry had, in fact,
already been spent.14
TABLE 5
Allocations and Disbursements of the 1965/66-1969/1970 Plan
ID (Iraqi Dinar) Million
Industry Total Progranune
Allocations Projects Expenditure Actual Disbursements
187.2 157.0
93.5
Source: Central Bank of Iraq, Bulletin.
668.0 561.2 414.4 *
* Includes investment expenditure for 1969/1970 covering Ministry of Finance grants, INDC capitalization etc.
ID Million
Year
1970-71 1971-72 1972-73 1973-74 1974-75
Source:
TABLE 6
Actual Expenditures of the National Development Plan 1970-1975
Industry
21.2 35.9 22.2 66.4
184.1
Total Progranune
78.1 153.8 128.5 243.9 576.4
Central Bank of Iraq, Bulletin, April 1977, p.44, as quoted in Mclachlan, n.19, p.94.
14. Jawad Hashim, Development Planning in Irag ~Historical Perspective and New Directions (Baghdad: Government Press, 1975), and the Abstract of Statistics 1975.
145
Fortunately, even before completion of the 1970-75 plan
the rise in oil prices effected in 1973, and, prior to that,
the nationalization of oil industry, added enormously to the
economy. Thus, financial allocations for the plan, too,
were considerably increased. The scale uf the plan was quite
large, not only because of increased oil revenues but also
because prices were very much higher; correspondingly
greater expenditure were required to obtain goods and
services. The projects included vehicles, electric
appliances, pulp and paper, petrochemicals, intermediate and
finished synthetic textiles, paints and plastics. The
contracts for the construction of the factories made with
many European firms, Japan and the United States. 15
A. Industrial Development Through the 1976-1980 Plan
In the second five year plan (1976-80), industrialization
was stressed as a means to complete the transformation of
the country's economy from free enterprise to socialism. The
15. Edith Penrose and E.F. Penrose, Irag: International Relations and National Development (London: Westview Press, 1978), pp.465-70. See, for the discussion of industrial plans in K. Langley, The Industrialization of Irag (Cambridge: Cambridge University Press, 1981). See also, for the detailed discussion of government investment activity prior to 1968 revolution in F. Jalal, The Role of Government in the Industrialization of Irag. 1950-1965 (London: Frank Cass, 1972).
146
immediate objectives of the plan were to increase and
intensify productivity, increase foreign trade and expand
and diversify industry along the lines of projects that had
already been specified in the previous plan. 16 "Since the
structure of the Iraqi economy", statedthe Ministry of
Planning's Report on Industry, "depends heavily on two
pillars -- oil and agriculture -- industrialization must by
necessity proceed to correlate the development of the two
together .... the aim of national industry should maintain a
balance between productive and consumptive goods, the former
should at first be stressed at the expense of the other in
order to ensure a self sufficient and independent national
economy". 17 The ultimate objectives of the plan were to
achieve full employment, increase wages and narrow the
disparity of income between rural and urban areas, and raise
the standard of living. It is hoped that greater prosperity
and welfare would be achieved and Iraq would become a truly
16. Majid Khadduri, Socialist Irag: A Study in Iragi Politics Since 1968 (Washington D.C.: Middle East Institute, 1978), p.133.
17. Ministry of Planning, Working Papers for the National Development Plan of 1975-80: Report on Industry, (Baghdad, 1976). See also Badr Ghaylan al-Ghazzawi, alTadbhir Fi al-Iraq al-Istihlaki Wa al-Istithmari Fi alIraq [Extravagance in Consumption and Investment in Iraq], al-Thawra (Baghdad), May 25, 1975.
147
socialist state among the "developed" countries of the
world. 18
A detailed discussion would be fruitful to show the
extent of success the Ba'th regime had by implementing its
policies, and to what extent did it lead Iraq towards the
improvement of its industrial sector. It would also help in
understanding whether emphasis was laid on large industrial
establishments or smaller one? whether industry or any other
sector benefited more? and how far the Ba'th regime was
successful in changing the industrial capacity and
production?
The Ba'th government was deeply committed to its post-
1968 industrial sector targets. The 1976-80 Plan received
annual budgetary allocations and overall targets were not
issued. Apart from that, the detailed sectoral breakdown of
allocation within the plan were not made available after
1978. The figures in Table 7 indicate the level of funding
given to industry in the annual budgets. Actual disbursement
18. Ministry of Industry and Minerals, Strategy of Industrial Development in !rag (Baghdad, 1976), p.57.
148
were claimed to match forecasts. 19 It was officially
announced after the five year period ending in November
1979, that ID 4,276 million was spent on industrial
development.
TABLE 7
Allocation of Industry in the 1976-1980 Plan
ID Million
Year Industry Total Plan Allocations
1976 709 1,523
1977 966 2,357
1978 686 2,800*
1979 1,313 3,283*
1980 2,096 5,240*
Source: Central Bank of Iraq, Bulletin; Baghdad Observer, Middle East Economic Survey; Middle East Economic Digest as quoted in McLachlan, n.19, p.95.
* Initial Budget Estimates.
The primary factor which guided the process of shaping
the government policy in industry was a perceived need for
quick enhancement in domestic production capacity in four
19. Keith S. McLachlan, "The Planning and Development of Iraqi Industry" in May Ziwar-Daftari, ed., Issues in Development: The Arab-Gulf States (London: MD Research & Services Ltd., 1980), p.94-95.
149
main fields: consumer goods, processing industry, basic
industry and petroleum- related industry. The 1976-80 plan
witnessed the government and the planning authorities trying
to meet these. However, within the constraints of annual
development budgets and a piecemeal approach to the problem,
the official publications laid emphasis for producing basic
consumer goods in the country and hence the 1976-80 plan
provided for the expansion of cloth manufacturing, tanning,
shoe-making and carpet weaving. Of course, efforts were made
to see Iraq self-sufficient in all the fields. Textiles
were, however, the main concern. 20
In the processing industry too, the government put
enormous pressure on the management of establishment to
improve their performance. At the same time, new production
capacity for manufacturing starch, baking bread, extracting
sugar from dates and making baby foods came into being. The
cigarette and match manufacturing industries were rapidly
expanded. 21
In the field of light industry the plan was directed
specifically at creating plans to substitute for imports. By
20. ibid, p.96-97.
21. McLachlan, n.19, p.97.
150
and large, this was a response to a changed situation inside
Iraq. Until the 1970s domestic demand for consumer goods was
low but the position changed drastically after oil explosion
in 1973. The 1976-80 plan included a proposal for
construction of 25 factories in this field. 22 Main items of
production were water heaters, electricity heaters,
telephones, cables, and other electronic products.
Generally, rising standards of living in Iraq during
the 1970s, estimated in the plan at an annual average of
13.3 per cent for the 1976-80 period to give a per-capita
income of ID 330 by 1979, "together with a quickening pace
of rural to urban migration that saw more than 60 per cent
of Iraqi residents in towns, were reflected in appereciable
expansion of construction activities in urban areas". Demand
for construction material exceeded domestic production and
constraints on supply helped to push up the rate of price
inflation. 23 For this reason also, the government gave a top
mo s t p r i or i t y t o the e s t a b 1 i s h men t o f f a c t o r i e s
manufacturing construction materials.
22. Kachachi, S., Industrial Development and Projects, Industrial Department, Ministry of Planning, 1974.
23. McLachlan, n.19, p.97.
151
TABLE 8
Industrial Expenditures, 1975-1979
( ID Million)
Sector
Chemicals & Petrochemicals Electricity Generating Plant Oil related items Construction materials Food Processing Mineral Extraction (non-oil) Textiles Timber & paper products Engineering goods Training
Total
Expenditure (ID Million)
880 950
1,100 440 210 270 147 136
88 55
4,276
Percent
20.6 22.2 25.7 10.3 4.9 6.3 3.4 3.2 2.1 1.3
100
Source: Baghdad Observer as quoted in McLachlan, n.19, p.96.
The industrialization programme within the 1976-80 plan
was one among several economic preoccupations of the State.
The plan was hailed as an example of 'Scientific Planning'.
The broad approach was outlined by Jawad Hashim. 24 Although
Hashim claimed that the country would be less dependent on
the oil but in reality, Iraq could not reduce its dependence
on the oil even by the time the plan came to an end.
24. Jawad Hashim is a good example of Ba'thist technocrat. He obtained his Ph.D. in statistics from the London School of Economics in 1966, and in 1968 became Minister of Planning in Iraq. He was removed from his ministerial post for a short period in 1971-72 and then again became an advisor to the Office of Economic Affairs of the Revolutionary Command Council.
152
Undoubtedly, there had been significant growth in the
industrial sector since 1960. In a number of firms
employment, output and value-added manufacturing
particularly large-scale manufacturing, increased steadily
during 1960-1970. In 1960, the industrial sector constituted
ID 5.44 million at a factor cost to the gross domestic
product (GDP); by 1970, this sum increased to ID 116 million
which doubled by 1975 and yet again, by the year 1979 it
touched as high as ID 504.3 million by 1979. 25
As shown in Table 9 most of the growth had taken place
in large establishments. By 1981, there were 1449 large
scale establishments, employing 177,000 workers. As for the
small establishments they were around 30,013 in number and
employ over 64,4000 workers. Growth in Large establishments
intensified after 1975, as iron, steel and petrochemical
plants started production. By 1981, large scale industry had
taken substantial lead in industrial employment as well as
output. The 4.6 per cent of industrial establishments,
categorised as large (employing ten or more workers)
employed 73.3 per cent of industrial workers, accounted for
85 per cent of industrial wages and salaries, and produced
25. Marr, n.4, p.256.
153
Table 9 : Industrial Establishments and Emplyees, 1965-80
Small Establishments Large Establishments• Total
Employees
Number % Employees % Number % Paid Unpaid Total % Number Employees
1965 1243 5.5 88,383 63.3 21,333 94.5 NA NA 48,334 36.7 22,576 131,677
1971 1300 4.2 103,909 60.62 29,940 95.8 27,928 39,553 67,481 39.4 31,270 171,390
1975 1349 3.32 134,600 56.9 39,275 96.7 52,405 49,588 101,993 43.1 40,624 236,593
1976 1479 3.78 142,700 62.5 37,669 96.2 38,652 46,808 85,460 37.5 39,148 228,160
1977 1548 3.6 150,100 61.0 41,719 96.4 44,847 50,955 95,805 39.0 43,267 245,905
1978 1654 3.6 158,600 63.7 40,065 96.0 42,543 48,002 90,545 36.3 41,719 249,145
1979 1692 4.0 181,300 66.0 40,419 96.0 43,322 50,039 93,361 34.0 42,I I I 274,66I
I980 1494 4.2 180,900 70.4 34,35I 95.8 34,720 4I,977 76,247 29.7 36,025 257,I47
I98I 1449 4.6 177,000 73.3 30.0I3 95.4 28,86I 35,539 64,400 26.7 3I ,462 24I .400
"Includes water and electricity establishments. Large estableshments are those employing ten or more workers; small, those employing fewer than ten.
Source: Iraq, Ministry of Planning; Statistical Pocketbook 1982 (Baghadad: Central Statistical organization, n.d.). pp. 29, 30, 32; Annual Abstract of Statistics. 1978, pp. 91, 118; Statistical Pocketbook 1976, p. 40; Annual Abstract of Statistics 1973, pp. 168, 169, 172, 173; Statistical Abstract 1965, p.150; Iraq, Ministry of Planning, Statistical Pocketbook 1960-1970 (Baghadad: Central Statistical Organization, 1972), pp. 88, 89.
71.3 per cent of the output (value at current prices).
Although small-scale firms accounted for 95.4 per cent of
the State's industries, they employed only 26.7 per cent of
industrial workers (including some unpaid family members),
paid 15 per cent of the wages and salaries, and prcduced
28.7 per cent of the output. 26
Although the Ba'th party wished to transform Iraqi
economy into a socialist one, but even in the large
industrial establishments, in respect of the rate of
increase in both input as well as output, private sector had
taken marginal lead. As shown in Table 10, output rose by
213% in the private and 203% in the public sector; input
increased by 220% and 205% respectively.
As shown in Table 11 that the numbe~ of small
industrial establishments also increased rapidly. 27
While on the one hand, the value of input and output
rose gradually from the early 1970s onwards, on the other,
there had been a direct effect on the rising State income
and expenditures on the input, output and number of small
industrial establishments. Thus, between 1974 and 1976 input
26. Government of Iraq, Statistical Pocketbook 1982, pp.29 and 30-32.
27. In the statistics they are described as small industrial establishments. However, they seem to be family enterprises, employing less than ten workers.
155
Year
1972
1973
1974
1975
1976
1977
1982
Source:
Table 10: Large Industrial Establishments, 1972-1977, 1982
Sector Number of Employees Value of Output Value of Input Establishments (in '000) (Million 10) (Million 10)
Public 182 71.1 171.81 101.50 Private 1107 44.7 63.96 54.01 Total 1289 116.4 235.77 146.51
Public 185 79.1 224.70 141.86 Private 1090 41.6 67.41 46.07 Total 1275 120.7 292.11 187.93
Public 198 86.16 264.34 196.08 Private 1043 37.80 87.39 63.16 Total 1241 123.96 351.73 259.24
Public 204 93.6 315.78 230.25 Private 1145 41.0 120.65 86.46 Total 1349 134.6 436.43 316.71
Public 225 99.5 428.07 283.15 Private 1254 43.2 161.83 115.62 Total 1479 142.7 589.90 398.77
Public 266 105.7 521.53 310.45 Private 1282 44.4 200.25 144.15 Total 1548 150.1 721.78 454.60
Public 270 134.3 1110.75 631.26 Private 1084 38.3 410.52 285.93 Total 1384 173.1 1520.77 917.19
Annual Abstract of Statistics, 1976, p.124: AAS, 1978, p. 91: AAS, 1984, p. 93, as quoted in Farouk-Siuglett and Sluglett, n.l, p.233.
Table 11: Small Industrial Establishments in Iraq~ 1970-1982
Year value of input value of output Wages and Total unpaid (ID million) (ID million) Advantages workers
1970 29.004 52.827 4,881 62,071 40,249
1971 31.031 60.781 5,947 67,481 39,553
1972 33.179 59.797 6,491 65,832 37,289
1973 55.848 85.883 5,525 59,876 32,833
1974 60.492 93.616 5,578 58,771 32,755
1975 176.592 278.298 26,632 101,993 49,589
1976 158.874 267.944 19,316 85,460 46,808
1982 426.905 737.722 56,895 79,019 ---
Source: AAS, 1977; AAS, 1984, p. 104, as quoted in Farouk-Siuglett and sluglett, n.l, p.234. unpaid workers - usually the owners or family members.
Paid No. of workers Establishments
21,822 28,180
27,928 29,940
28,543 29,583
27,043 26,377
26,016 26,332
52,405 39,275
38,652 37,669
--- 34,782
rose from ID 93.616 million to ID 267.944 million, more than
double, while output rose from ID 93.616 million to ID
267.944 million, alomst triple. The number of small
industrial establishments rose to 37,669 from 26,332. It is
important to note that these establishments did not expand
correspondingly in terms of of number of employees, so that
the increase indicates proliferation rather than expansion
of operation.
TABLE 12
Public and Private Sector Share of Inputs and Outputs of Industrial Establishments Employing
10-250 Employees, 1981-82
1981 Inputs Outputs
1982 Inputs Outputs
Public Sector 18.7 23.6 18.9 20.1
Private Sector 81.3 76.4 21.1 79.9
Source: Robert, Springborg, "Infitah, Agrarian Transformation and Elite Consolidation in Contemporary Iraq" in Middle East Journal, vol.40, no.1, Winter 1986, p.48.
As far as employment in "industry" was concerned, the
private sector employed about 130,000 people in 1977 while
158
the public sector employed 105,700. 28 The overall resilience
of private capital in medium-sized industries (employing
between 10 and 250 persons) is given in Table 12, which
indicates that the private sector contributed around 20% of
input and output in the early 1980s.
Since the State expenditure was concentrated mainly in
infrastructural projects, the industry did not get a
considerable share. The contribution of the different
sectors to GDP for 1977-79 (Table 13) shows that the total
contribution of construction, trade, restaurants and hotels,
transport and communications, etc., amounted to almost
double of that of the industry. Thus, these three sectors
alone contributed ID 832.3 million to GDP in 1977, ID 955.6
million in 1978, and ID 1048.3 million in 1979. It may be
noted that the contribution of the industrial sector
amounted to less than 7 per cent of GDP, while the other
three sectors accounted for more than 14 per cent in 1977
and 1978, and a little over 10 per cent in 1979. Hence, in
absolute terms the contribution of these three sectors
amounted to more than double of that of the total of
manufacture or shares of agriculture.
28. Farouk - Sluglelt and Sluglett, n.1, pp.235-36.
159
TABLE 13
GDP 1977-79 in ID Million
Agriculture, forestry and fishing
Oil
Manufacturing industries
Electricity, water, gas
Construction
Trade, restaurants, hotels
Transport, communications
Finance, insurance, banking
Government services
Other services
GDP at factor costs
Net indirect taxes
GDP at market prices
1977 1978
412.1 473.0
2,818.7 2,990.8
388.8 464.5
.........
..:>'±.::J 45.6
277.7 317.6
263.9 308.4
290.7 339.6
118.8 138.9
101.1 118.2
635.2 742.3
5,291.0 5,938.9
378.8 890.1
5,670.0 6,829.0
1979
5,868.5
504.3
49.5
344.8
334.8
368.7
150.8
128.7
805.9
8,556.0
1,007.7
9,563.7
Source: Arab Economic Report, 1982, General Union of Arab Chambers of Commerce, Industry and Agriculture, (Beirut, 1983).
The service sector is also important, amounting ID
635.2 million in 1977, ID 890.1 million in 1978, and finally
ID 805.9 million in 1979, thus making a much higher
contribution than industry or agriculture. No data are
160
available relating to the category of these "other
services". Moreover, since no accurate information is
availiable with regard to the rate of inflation, it is
difficult to measure the actual amount of development and
growth over these years.
Table 14
Distribution of Investments 1971-1978 in ID Million
Year 1971 1972 1973 1974 1975 1976 1977 1978.
Agriculture 60 23.2 65.0 190.0 207.5 268.0 386.9 495.2
Industry 50.0 28.0 60.0 225.0 448.0 709.0 966.0 1352.4
Transport and 28.0 16.0 40.0 120.0 166.0 242.5 351.6 439.5
Communication
Construction 28.0 22.0 45.0 175.0 188.0 213.2 288.2 380.4
and Services
Total allocation
of production
sectors 166.0 89.2 210.0 710.0 1009.5 1432.7 1992.7 2667.5
Total
Investments 119.8 88.1 168.2 458.4 629.2
Source: Fiches du Mende Arabe. No. 936, 19 April 1978.
Table 14 gives information on the distribution of
investment over the 1970s. Also, the table shows the direct
161
impact of the oil price rise during the 1970s. It is
important to note that investment in all economic sector
tripled or even quadrupled between 1973 and 1974 and
continued to rise steadily for the latter half of the 1970s.
Although such investments had a highly stimulating effect on
the economy, its overall structure and the contribution to
various sectors and thereby to the GDPappears to have
remained constant, until the outbreak of war with Iran in
1980. 29
However, the construction sector witnessd a remarkable
boom and it is here that the dominance of private capital
has become particularly evident. In the year 1980, the
private sector contributed 87.8 per cent of the GDP, rising
to 93.8 per cent by 1982. 30 Official statistics show a
steady increase in the member of workers, from 29,457 in
1973, to 38,021 in 1974, to 62,595 in 1975, rising further
to 92,580 by 1978 employed in public sector construction. 31
It is difficult to discern the accurate number employed in
the private construction since they included a sizable
29. Robert Springborg, "Infitah, Agrarian Transformation and Elite Consolidation in Contemporary Iraq" in Middle East Journal, vol.40, no.1, winter 1986, p.48.
30. ibid.
31. Ministry of Planning, Annual Abstrct of Statistics, 1978, p. 116.
162
number of seasonal labourers, and migrants who were
newcomers to the urban areas and were often not officially
registered. According to the data provided by al-Khafaji the
number of such workers was 131 in 1978 (Table 15) . 32
TABLE 15
Numbers and Average Monthly Wages of Employees in Construction in 1978
Grade of employee Public Sector Private No. Wages No.
Engineers 3,934 213.8 41
Labourers 92,242 88.5 66,525
Administrators 4,159 113.2 45
Guards 7,547 36.8 5,519
Other 5,519 95.4
Total 113,428 72,131
Source: al-Khafaji, n.S, p. 44-47.
Sector Wages
143.9
97.4
105.5
18.9
In recent years greater priority has been given to
industrial developments, as the Government has sought to
reduce the State's dependence on the petroleum industry
(Table 16) .
32. al-Khafaji, 1983, n.S, p.44-47.
TABLE 16
Selected Products, 1989-1991 ('000 metric tons, unless otherwise indicated)
Cigarettes (million) Cement Liquified Petroleum gas* Naphtha Motor Sprit (petrol) Kerosine Jet fuel Distillate fuel oils Residual fuel oils Lubricating oils Paraffin wax
1989
27,000 12,500 1,428
700 2,600
790 500
5,700 8,200
200 90
Petroleum bitumen (asphalt) 460 Electric energy(million KWh) 28,900
1990
26,000 13,000
1,110 600
2,500 600 410
5,100 7,200
180 70
450 29,160
1991
13,000 5,000
170 450
1,600 560 250
4,500 5,000
175 10
350 20,810
* Includes estimated Production ('000 metric tons) from natural gas plants: 1,128 in 1989, 900 in 1990, 0 In 1991, and from petroleum refineries; 300 in 1989; 210 in 1990; 170 in 1991.
Source: UN, Industrial Statistics Year Book as quoted in The Middle East and North Africa, 1995 (London: Europa Publications, 1995), p.497.
The latest development in the manufacturing sector has
been in the production of pharamceuticals, electrical goods,
telephone, cables and plastics, and in the establishment of
more food processing plants.
The USSR has assisted with the construction of eleven
factories, including one steel industry and one electrical
equipment factory at Baghdad. Considerable industrial
164
development is also taking place in co-operation with East-
European countries; various plans have been finalized and
the contracts signed, including one with Bulgaria in 1984
for expanding the northern tobacco industry. Other projects
include the establishment of an electronic industry, in
coopertion with Thomson CSF of France. 33
In July 1988, following a number of earlier attempts to
reorganize the Government departments responsible for
industry in Iraq, the civilian and military industry was
placed under the control of a Ministry of Industry. In
August 1988, the new ministry announced that it would sell
47 factories to the private sector by the end of the year.
Moreover, Iraq allocated the equivalent of $ 11,500 million
for investment in development projects in the fiscal year
1988, some 42 per cent of which was' to be used for
industrial and agricultural schemes. Some 229 light
industrial schemes (costing investment of ID 243m), were
listed in the Five-Year Industrial Development Plan (1986-
90) and were also open to private local and foreign
investment. 34
33. The Middle East and North Africa 1995 (London: Europa Publications, 1995), pp. 490-91.
34. ibid, p.491.
165
After the Gulf crisis and the subsequent UN economic
sanctions, many factories were compelled to close down or
reduce their manpower. In April 1993, the Iraqi Minister of
Labour admitted that due to prolonged UN embargo, Iraq has
registered a large number of unemployed people for the first
time in history.
Overall the industrialization programme in Iraq have
been analysed differently by various scholars. Yusif Sayigh
ha s s e en i t a s s t i m u 1 a t i n g a v a s t ex pans i on and
diversificaton in industrial investment, while others have
ben less impressed and opined that a successful outcome is
far from sure.35
4 . AGRICULTURE
After coming to power the Ba'th party in 1968 considered it
most essential to give special attention to the agriculture,
as condition of the peasantry at that time was most
deplorable. Although Qasim regime, immediately after the
35. Yusif Sayigh commands the reputation of an authority on Arab Economy. See Yusuf Sayigh, The Economies of the Arab World (London: Croom Helm, 1978), p.43. See Khadduri, n.16, pp.l29-34. See also Kachachi, S., industrial Development Strategy and Policies: the Experience of Iraq 1950-72 (Vienna: UNIDO, 1973).
166
Revolution of 1958, demanded the abolition of the nefarious
'feudal system' and subsequently 'Agrarian Reform Law' that
was enacted on 30 December, 1958 36 , but this law could not
make much headway in improving the conditions of the farmers
who have been a deprived lot since time immemorial.
Hence, realizing the gravity of problems still faced by
peasants, the Government, in 1969, revised the Agrarian
Reform Law of 1958 with a view to abolishing the
compensation for the lands taken over from landowners on the
plea that initially these lands belonged to the State and
the dispossessed tribal shaykhs and landlords had obtained
their landownership with nominal or no payment to the State
through their political influence. Afterwards, the land
taken over from them was put on landholdings and distributed
among peasants without charge. However, in this process the
upper class people were exempted; their possession of lands
remained intact with them. Nevertheless, because of the
lacunae inherent in the Agrarian Law of 1958, as well as the
administraative difficulties in its implementation, even the
36. This law empowered the government to take away lands from landlords in excess to a certain minimum ownership and distributed to peasants who were to cultivate their newly acquired land, with charge. For detailed discussion see Majid, Khadduri, Republication Iraq, (London: Oxford University Press, 1969), p.150.
167
revised version of Agraian Law proved insufficient. 37
Necessity was once again felt to promulgate a comprehensive
law to correct the situation. All these factors paved way
for the Agarian Reform Law of 1970.
The new law provided a number of innovations by way of
rectifying the difficulties and to achieving justice in
accordance with Ba'thist principles. Since all peasants did
not own any land and, on the contrary had long been an
object of exploitation by the landlords, it was felt
necessary to enable every peasant, indeed all those willing
to engage in agriculture, 38 to have the right to acquire
land for cultivation. A maximum limit of ownsership was
fixed at 200 dunams. (One dunam is equal to one fourth of a
hectare or 2500 square meters) . The landowners having lands
in excess of this limit had to give away the excessive
position. In this regard the reason extended by the
Government was that originally all lands belonged to the
State and also that most of them (the landlords) had
37. Amir, al-Khashshali, Fi al-Mas'ala al-Zera'iya [on the Agrarian Problem], (Baghdad, 1975), p.12-13.
38. Article 18(c) of Agrarian Reform Law of 1970 stated that any Arab Citizen of other countries as well as graduates of agricultural colleges, institutes and schools and any other Iraqi citizens not occupied in other professions but agriculture may be included.
168
captured it through political influence. 39
However, the land acquired through this method, though
given to peasants free of charge4 0, the area of land given
to each peasant varied from place to place, the reason being
that the value of the land too, varied depending on certain
factors like fertility, the procedure available for
irrigation, and the access to markets. 41 However, the law
did not favour the common peasant in the case of gardens and
orchards; the owners of orchards retained the title because
of their technical know-how required for growing fruits,
etc., which, of course was thought to be beyond the small
and common farmer's ability and comprehension. 42 The
peasants were provided with adequate supplies of seeds
fertilizers, and irrigated water, etc.
Besides the above facilities, the new law also provided
for the establishment of co-operatives to help peasants
39. See the official justification for dispossession in the Official Gazette, Baghdad, May 30, 1970.
40. Thus abolished the compensation specified in earlier law.
41. A maximum of 200 dunams of land, if irrigated by rainfall was given free to peasants but a maximum of 60 dunams, if it were artifically irrigated (Article 16 of Agrarian Reform Law of 1970).
42. Article 31 of Agrarian Reform Law of 1970.
169
individually and collectively, to help them in maintaining
collective farms. The functions of these co-operatives may
be summed up as follows:
1. To increase agricultural production and utilize the
lands intensively.
2. To· help farmers in the implementation of agricultural
plans and to enhance agricultural production.
3. To provide farmers with requisite technical material
and equipment for the development and increase of
agricultural production.
4. To assist farmers in acquiriing or hiring agricultural
machinery, tools and means of transportation as well as
to help them in the method of utilizing chemical
feritlizers and insecticides.
5. To assist in the marketing of agricultural products
generally and in the steps to be undertaken before
marketing such as classifying, storing, dehydrating,
canning, shipping, etc.
6. To improve housing and living conditions and to raise
the social, cultural and hygenic standards, keeping in
view existing disparity between
standards of living.
170
rural and urban
7. To help the farmers in obtaining loans and render any
other services needed to speed up agricultural
development. 43
In 1970, after the Agrarian Reform Law was issued, the
Ba'th Government chalked out a Five year Development Plan in
which agrarian development was given a primary
consideration. The Government's stress on the agrarian
reform as the primary aim of the Five Year Development Plan
is reflected in the increasing amount of expenditure after
getting the projects underway . In the year 1970 only, an
amount of ID 180,000,000 were earmarked for the agriculture
projects which rose to ID 420,000,000 in 1974-75. 44
After the Five-year period, the Government declared
that feudalism has been consideraly weakened. The reason was
that the the Government had taken away about 10 million
dunams of land from the feudal Landlords out of which around
7.5 million dunams had been distributed among the landless
peasants. Besides, by 1975, the number of established co-
operatives, had increased to 1600, catering to over 200,000
43. See Articles 39-40 and 42-43 of Agrarian Reform Law of 1970.
44. Khadduri, n.16, p.122.
171
families. 45 Moverover, the Government had provided various
means to encourage farmers to promote and increase the
quality and quantity of production. But, despite several
significant changes, the increase in agricultural production
had not kept pace with the increasing demands of a rapidly
growing population. Migration from rural to urban areas is
still continuing, although measures had been taken to
encourage farmers to stay on their farms. 46
Although the intention of the Government was to bridge
the widening gap between cities and countryside, it did not
believe that private ownership in land should be wiped out.
The acquired land was to be distributed to landless or poor
fallahin, and land reform co-operatives on the Egyption
model were to be introduced. However, in practice, the
fallahin usually parcelled out the land among themselves and
their families, and ~cooperation' was basically confined to
marketing and to activities traditionally undertaken on a
45. Khadduri, n.16, p.122.
46. For a survey of agricultural development fron 1968 to 1974, see Hasan Fahmi Jum'a, Munjazat Wazarat al-Zera'a wa al-Islah al-Zira's [Achievements of the Ministry of Agriculture and Agricultural Reform] (Baghdad, 1974). For earlier development see Abd al-Wahhab Mutar alDahiri, al-Tahlil al-Iqtisadi li~ Amaliyat al-Intaj alZira 'i [Economic Analysis of the Process of Agricultural Production) (Baghdad, 2nd.ed. 1969].
172
collective basis, e.g., digging and maintenance of
irrigation canals. The reasons for the failure of the
cooperatives were ecological; besides this lack of technical
know-how was also a factor.
By the end of 1976, a total of 1.9 million hectares of
land had been distributed to 235,559 individuals and another
0.9 million hectares was made available for rent to 115,972
individuals. Nc more sequestrations or distributions were
undertaken subsequently. 47 In July 1979, Saddam Husain,
became President as the then President al-Bakr resigned due
to poor health. Soon after assuming of power, he made
drastic changes in the agricultural sector. As long as the
Ba'th Government had enough resources to compensate both for
the general decline in agriculture and for its inability to
keep up with increasing consumer demand and supply by
importing foodstuff, there was no urgent need to pay
attention to the loss in this field. But, the war with Iran
had, apparently, compelled the regime to change its policies
and adopt the method of infitah or economic open door
47. Salim I. Ibrahim, "Socio-Economic Status and the Utilisation of Agricultural Machinery in Iraq", Arab Planning Institute (Kuwait, 1979-80), p. 37-44.
173
policy. 48 in the agricultural sector.
The food import bill which amounted to $ 1.4 billion
by 1980, was indeed a financial burden. Despite the
tremendous expenditure on imports, food shortage, specially
of fruits, vegetables and eggs, continued to plague the
consumers. Urbanization, accelerated by the oil boom
continued and the uumber of indigenous agricultural labour
declined to the tune of half-a-million workers between 1973
and 1977. The migration reduced the agricultural labour
force from 50 per cent to 30 per cent during the same
period. 49 The resultant labour shortage in the villages
compelled importation of foreign labourers and technicians,
mainly from Egypt. This caused a further draining of foreign
exchange. The above factors were responsible for bringing
about the changes in the agricultural sector. We shall now
discuss the impact of these changes on Iraqi agriculture.
48. Saddam Husain, when asked, if his policies toward the private sector amounted to an infitah, replied, "I do not like this kind of terminology since it has come to apply rightist reactions. But, he further stated, there must be balance between private and public sectors, See Fuad Matar, Saddam Hussein: The Man, the Cause and the Future (London, 1981), pp. 254-58.
49. Economic Intelligence Unit Special Report No. 88, Irag: A New Market in a Region of Turmoil (October 1980), p.S, cited in Joe Stork, "Iraq and the war in the Gulf", MERIP Reports, 97 (June 1981), p.13.
174
The new policy on agricultural inputs, especially
credit, has benefited landowners. Table 17 shows that the
allocations of loans by the Agricultural Cooperative Banks
has shifted significantly away from the public sector. An
indication of the infitah can be seen in Table 18, which
reveals that a significant redistribution of ownership of
agricultural machinery, away from the public and toward, the
private sector, occured between 1979 and 1982. 50
TABLE 17
Shares of Agricultural Cooperatives and Private Agricultural Sector of Loans Granted by the Agricultural
Cooperative Bank, 1978-83
1978 1979 1980 1981 1982 1983
Agricultural Cooperatives
64.7 67.0 24.0 15.1 21.6 33.9
Private Sector 35.3 33.0 75.6 84.9 78.4 66.1
Total
Source:
100% 100% 100% 100% 100% 100%
Calculated from Annual Abstract of Statistics. 1982 (Baghdad: Central Statistical Organization, n.d.), p.83 and p.130; and Annual Abstract of Statistics, 1983 (Baghdad: Central Statistical Organization, n.d.), p.84-85.
50. In 1979 the public sector owned 5,541 pumps, 2,497 combines and 5,492 tractors, while by 1982 these figures had come down to 2,074, 865 and 2,449 respectively. The number of pumps in the private sector increased from 26,717 in 1979 to 35,662 in 1982, of combines from 946 to 1,908, and of tractors from 14,566 to 27,507. See Annual Abstract of Statistics, 1983, p.86.
175
TABLE 18
Distribution of Agricultural Machinery in Public and Private Sector
Pumps Combines Tractors 1979 1982 1979 1982 1979 1982
Public Sector 17.2 5.5 72.5 31.2 27.4 8.2
Private Sector 82.8 94.5 27.5 68.8 72.6 91.8
Source: Calculted from Annual Abstract of Statistics, 1983, p.86.
The Government policies which affected agricultural
output, show a keen desire to stimulate production,
particularly within the private sector. Prices of almost all
commodities had increased, not only due to irresistible
market forces, but also as a consequence of explicit policy
decisions of the Government. The impact of changed policy on
the agricultural sector has been to stimulate output of
those commodities produced basically by private operators,
and particulary those produced by capital-intensive methods.
New marketing arrangements benefited private producers
of agricultural commodities which lured many medium and high
ranking state employees and party officials who joined
private businessmen and professionals in buying or leasing
land, particularly in the suburbs of Baghdad.
176
5. DEFENCE EXPENDITURE
In 1972 Iraq nationalized the foreign owned Iraq Petroleum
company (IPC) and this act of nationalization together with
oil price explosion increased government oil revenues
tremendously. This sharp increase in revenue enabled the
government to finance infrastructural project, expand
social service and modernize and exapand the military.
Prior to 1970, economic development plans in Iraq were
based on the idea of investing in physical plant and
infrastructure and did not give importance to human resource
development. Labour force needs were not defined, nor were
they based on any realistic estimates of the skill
requirements implicitly needed for planned capital
investments. The result was a shortage of skilled workers in
certain technical fields and an excess in other. 51
The 1971-75 and 1976-80 national development plans
tried to remove these defects. The 1971-75 Plan stressed
that "labour force planning must go side by side with
economic development planning". Now planners realized that
no effective manpower and employment planning could be
51. Mehdi Abbas Sal ih and 01 i ve Robinson, "Economic Development & the labour Market in Iraq", International Journal of Manpower, 1983, p.32.
177
performed without overall National Planning. Data have been
provided on Iraq's actual expenditures on education and
health.
1. Government expenditures for education on per capita
basis expanded by 17.28 per cent between 1974 and 1979.
2. Health expenditures increased more rapidly at the rate
of 23.63 per cent during the late 1970s.
3. However, there was a major contraction in educational
expenditures, averaging a decline of 5.74 per cent per
annum on a per capita basis during 1979-84,
4. The share of educational expenditures in gross national
product (GNP) in Iraq increased slightly from 3.12 per
cent in 1974 to 3.19 per cent in 1979, and to 3.40 per
cent in 1984.52
It is worthy to note here that education and health
expenditures have suffered as a result of Iraq's massive
expenditure on military programme. In all the budgets
produced so far, military and security have got the highest
52. Robert E. Looney, "Economic Development in Iraq: Factors underlying the Relative Deterioration of Human Capital Formation", Journal of Economic Issues, vol.XXVI, no.2, June 1992, pp. 616-17.
178
priority. Their share was highest in the pre-revolutionary
period, consuming 62 per cent of the regular budget; under
th Ba'th rule it averaged about 44 per cent for the first
half of the 1970s. 53 However, in absolute amount, the
military budget was double in those year in comparison
either to industry or health and education.
In the budgets produced between 1970 and 1975, the
highest amount, ID 1.4 billion ($ 4.34 billion), went to
defence and security, next in priority came education and
health with ID 631 million ($1.96) billion) less than half
of the defence allocation. Transportation and communication
got ID 315 billion ($976 million), agriculture ID 302
mi 11 i on ( $ 9 3 6 m i 11 i on ) , and h o u s i n g , b u i l d i n g and
construction received a paltry 272 million ($843
million) . 54 It is absolutely impossible to obtain the exact
amount of military expenditures after the outbreak of Iran-
Iraq war, but indications suggest that these above-mentioned
priorities have been maintained in the later period also.
53. United Nations, Economic Commision for West Asia (ECWA), "Industrial Development in Iraq: Prospects and Problems" (ECWA, Beirut, 1979), p. 7.
54. ibid
179
6. CONCLUSION
Iraqi economy had been adversely affected by various
factors. Firstly, the prolonged war with Iran led to huge
military expenditure resulting in massive foreign debt.
Secondly, on account of oil glut from 1981 onward, Iraq
could not earn significant foreign exchange. Finally the
Gulf War, which officially ended on 28 February 1991, and
the subsequent UN embargo on trades, completely shattered
the Iraqi economy.
The war with the Iran, in particular, forced the Iraqi
government which was committed to the socialist ideology, to
change its policy and promote private sector. This decision
was endorsed publicly by the President Saddam Husain in
1984, and later again in 1986 when he emphasised that
" ... all activities of the private sector form a part of the
national wealth, and are as important as the activities of
the socialist sector. 55 He stressed this position again in
1987 when he said that, 'our brand of socialism cannot live
without the private sector whether now, or after the war' . 56
55. Middle East Economic Digest (MEED), 15 February 1986, p.17.
56. ibid, 28 March 1987, p.18.
180
Significantly, the infitah or economic open door policy
is not implemented in the oil industry which is main sector
of the Iraqi economy, since the international and capital
intensive nature of that industry determine its fundamental
character and does not permit for it. In agriculture, the
sector of second major importance, the impact of
privatisation is widespread. Similarly, private capital
investment rose remarkable in industry sector, especially in
large industrial establishments. After assessment, we find
that the privatisation of agriculture failed to increase
output because innumerable number of rural workers as well
as peasants were incorporated into armed forces. The
liberalisation of foreign trade failed to convince the
private sector to repatriate its foreign-held capital.
Another problem with the new economic policy was that the
State was, interested in shifting some of its economic
responsibilities through the transfer of enterprise
ownership, and it did so, but without providing the legal,
economic and institutional framework, which was essential
for smooth functioning of private sector. This lacunae,
resulted in, many enterprises being sold at price, well
below their book-value. A more serious problem was the
income redistribution effect of privatisation on account of
the elimination of subsidies to enterprises which generated
181
or distributed basic economic goods at comparatively low
cost to consumers with a low or fixed income. Since personal
income did not offset the erosion in purchasing power, the
new policy had "the effect of lowering the living standards
of million of Iraqis"_5 7
In the present scenario, when Iraq is not able to
provide sufficient milk to the infants and, in view of the
consequences of tm embargo in each sphere, the country is
exposed to rather bleak future. The infrastructures that
were build up in Iraq over the last three decades, are
destroyed in massive bombing by allied forces led by the
United States. The decade-long war with Iran had already
shattered its economy, and resulted in impoverishment of the
people. Now it is worth-watching how Iraq would come out
from these chronic problems and start re-building its
economy from almost the lowest point.
57. Abbas Alnasrawi,"Iraq: Economic Consequences of the 1991 Gulf War and Future Outlook", Third World Quarterly, vol.13. no.2, 1992, p.339.
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