The Iraqi government is growing in size, steadily moving towards pre-2003 levels, according to this NY Times piece by Campbell Robertson. Not only the growth in the size of the government is putting pressures on the budget, it is also a sign of another worrisome trend – the inability of the private sector to generate jobs and provide opportunities outside of the public sector.
One interesting stat:
In 2006, 31 percent of Iraq’s labor force was working in the public sector, according to the agency for statistics in the Ministry of Planning. The agency expects that figure to reach 35 percent this year, about 5 percentage points short of where the C.I.A. estimated it to be on the eve of the 2003 invasion.
As the article puts it, the problems of private sector growth and job creation are linked to the security situation and the lack of credit. While these are certainly important factors, another key point is missing in the analysis - institutions.
CIPE’s own survey of the Iraqi business community revealed that its was legal and regulatory climate as well as governance concerns that private sector saw as impediments to its own growth, especially as many felt that the security situation did improve last year. More specifically, outside of security, the top concerns for Iraqi companies were:
- Not applying laws and regulations (i.e. lack of enforcement)
- High fees
- Lack of respect for property rights
- Difficulties in obtaining loans
- Challenges of communications
Certainly, the government has its hands full. Still, thinking more broadly about improving the business climate across the board – not just providing loans – and taking tough steps to actually improve it, is a viable solution to the employment problem in Iraq. And, considering the growing pressures of its own size, its in the best interest of the government to do so.