As Iraqi citizens celebrate the formation of a government eight months after elections, broader government stability remains largely untested. There is more at stake than which party will be in control or which faction will have the most power. With electricity and gas prices still costing most people up to half their monthly salaries, the ability of the government to deliver basic services in an affordable manner is still in serious doubt, with serious repercussions for long-term stability. For the new government to mend this damaged relationship, it should privatize those services it can no longer efficiently or affordably deliver, providing space for innovate and cost-effective private sector solutions.
The biggest example of why privatization is needed can be seen in Iraq’s energy prices. Gas costs $1 more per gallon in Iraq than it does in the United States. Likewise, a monthly electricity bill can range anywhere from $300 to $500 per month. The high electricity price is due to the fact that Iraqis have to pay on two fronts – the average bill is divided between the local street generator that is operated by mafias exhorting the price and the monthly bill paid to the national electricity company. The lack of maintenance and the absence of new power plants in this rich country have caused the overall deterioration in quality of life, the second leading factor behind the exodus of Iraqis out of the county after security.
The privatization of government institutions dedicated to providing services provides a path forward for the reconstruction of Iraq and rehabilitation of infrastructure. Most infrastructure has been completely destroyed, ranging from electric power plants built in the fifties, to increasingly derelict crude oil refineries, to aging hotels in Baghdad. Over and over, the last seven years have demonstrated that huge state-owned institutions are not able to yield a profit and lack professional management and strategic growth.
The first step the government can take is to step back and give the opportunity for the private sector (foreign and local companies) to invest in all these areas. The government does not have the capacity, technologies, and necessary resources for rebuilding and maintaining huge services projects. By allowing private companies to deliver services, Iraqi citizens will be able to automatically feel a tangible difference in their day-to-day lives. Such a difference will plant the seeds of confidence that the new government can make the right decisions, and will begin to grow trust between Iraqi citizens and their government, as it begins once again to govern.
Published Date: November 12, 2010