The debate about the causes of the economic crises in the Kurdistan Region of Iraq and people's hardship rages on. The Kurdistan Regional Government (KRG) blames Baghdad for cutting budget payments since 2014, while Baghdad accuses the KRG of not adhering to deals made to hand over revenues from oil exports and customs.
The truth of who is to blame might never be known. However, both sides must take responsibility and share the blame.
On the KRG side, the two main ruling parties, namely the Kurdistan Democratic Party and the Patriotic Union of Kurdistan, have adopted policies that led to market contraction, retreatment of investment, and a decline in growth that contributed to a rise of unemployment to dangerous levels and personal hardship. The people's suffering was exacerbated by Baghdad's actions, war with the Islamic State (ISIS), and the coronavirus pandemic. The Kurdistan Region’s people are in desperate shape. This has prompted young people to emigrate and seek asylum abroad in their thousands.
Baghdad's successive governments, starting with that of Nouri al-Maliki and ending with Mustafa al-Kadhimi, also bear a significant part of the responsibility. They dealt with the Region's people as if they were citizens of another country, without paying attention to the reality and deteriorating conditions. The suffering of the citizens of the Kurdistan Region increased due to the ebb and flow of relations between the federal government and the KRG.
Absence from Baghdad
Kurdish leaders believed that they are impervious in the Kurdistan Region and Baghdad's troubles don't concern them. Their participation in solving Iraq's economic, political, and social crises are kept to a minimum. They take part in leadership meetings on ad hoc bases and for a few hours, without real contribution in offering solutions or forming strategies. None of the Kurdish political leaders reside in Baghdad. Their visits are abrupt, fast, and far between, sometimes for few hours only.
This divergence between Iraqi and Kurdish political leaders led to widening the gap between them. The decline in relations contributed to the loss of the Kurds' influential role in Iraq's public policies. Their involvement in planning and debating solutions to address the challenges and crises of Iraq is limited. As a result, Kurds became much weaker in Baghdad. That was apparent in the formation of the governments of Haidar al-Abadi in 2014 and Adil Abdul-Mahdi in 2018. On both occasions, Kurds were not even in attendance as proceedings for voting in parliament began.
Some might ask about the role of the president, who is a Kurd, or the ministers and parliamentarians representing Kurds, and why they are not compensating for the political parties. The truth is that the latest internal disputes and crises among Kurdish parties led to weakening the hand of Kurdish officials in Baghdad. The Kurdish leadership decides on critical matters from Erbil and Sulaimani, sometimes without even consulting with those in the Iraqi capital.
Corruption and mismanagement of resources
The endemic corruption in Iraq has roots in the Kurdistan Region, too; it is all the same school. However, corruption in Baghdad is widespread in all governments and their institutions. In comparison, while corruption in the KRG is rampant in the Region at the level of the government and ruling parties, the majority of government employees perform their duties with integrity and carry out their work with high professionalism.
Corruption in the KRG has been institutionalised by establishing companies affiliated with the ruling political parties and operating according to government facilitation. For example, private companies operate at border crossings and impose various charges on cargo trucks entering Iraq.
Ali Hama Salih, a member of the Kurdistan Region parliament, wrote in a report submitted to the KRG prime minister that 13 private companies affiliated with political parties working at border crossings netted $60 million a month. They levy several types of duties and fees. As an example, he said, "matching the certificate of origin costs $700." He expressed surprise as to why the government itself is not doing this job and netting the revenues. Observers believe that KRG customs and border-crossing income could reach $200 million a month if it is organised and cleaned up.
Mismanagement and corruption of natural resources are also contributing a great deal to the financial crises suffered in the Kurdistan Region, especially in the oil and gas sector. Companies owned by the political elite control this sector. Management of these companies does some great work outside the sector to enhance the economy, but the lion's share of their profits goes to the political leadership and not into the treasury of the KRG. Besides, the sector lacks transparency over the exact volume of oil exported, the revenues, and the smuggling carried out, in addition to rampant corruption in the import and sale of refined products, and the monopoly, which is confined to a small group of businessmen under the protection of influential party figures.
Reform is the only way forward
The outbreak and escalation of protests in Sulaimani differ this time in terms of participation. We see that it is not limited to the revolutionary youth, but rather groups of teachers and government employees, often aged fifty to sixty years old. They are frustrated by the lack of solutions to their problems and accuse the ruling parties of doing little to ease their suffering. All civil servants throughout the Kurdistan Region share this sentiment and therefore it is not unreasonable to think that the circle of protests could expand to include Erbil and Duhok.
The KRG’s economic crises will further deepen with the collapse of Iraq's economic and financial situation, which has reached the point that the federal government isn't able to pay the salaries of employees and retirees, and must resort to internal and external borrowing.
The Kurdish leadership needs to realise that their old political alliances are no longer working and Baghdad is heading towards ignoring Erbil. This will be apparent in the 2021 budget law. Lawmakers intend to tighten up articles about the KRG to make sure there are no loopholes this time that enables the government to pay the KRG, as happened over the past two years.
In addition, the Kurdish leadership needs to start implementing the reform law passed in its parliament in February 2020. This law is an excellent first step to stop corruption, enhance the public sector, and institutionalise the government.
It is worth mentioning that the international community is adamant it will not support the KRG to ease its financial troubles without much-needed reform. They are fully aware of what is taking place within the Kurdistan Region.
The KRG has plenty of resources and income streams. With acceptable house-keeping practices, stopping waste of public funds, preventing corruption, increasing revenue from various sectors, especially oil and gas and the borders, increasing trade exchange, and supporting the private sector, the government will meet its obligations to pay salaries and protect itself from the possible collapse that Iraq is facing.
Farhad Alaaldin is the Chairman of the Iraqi Advisory Council. He was the political adviser to former Iraqi President Fuad Masum, the former chief of staff to the KRG prime minister from 2009 to 2011, and former senior adviser to the KRG prime minister from 2011 to 2012.
The views expressed in this article are those of the author and do not necessarily reflect the position of Rudaw.
