How it could have been all avoided!
The lack of capital injection from Baghdad into the Kurdistan Region has slowly dried up the economy. The question is; how could it have been all avoided in the first place?
I met with a senior official at the Ministry of Finance a few days ago. He said that we have around 1,400,000 people in Kurdistan on the government pay roll. Only around 640,000 of these are actually working in a government job, the rest are just getting paid. This huge number of employees is consuming more than 70% of the Kurdistan Regional Government budget, which is around $700,000,000, leaving only $300,000,000 for everything else, including reconstruction, growth and economic development.
What is the main source that is feeding this huge nanny state? Baghdad. It was grudgingly sending Kurdistan’s share of the budget. Kurdistan has been entirely dependent on Baghdad’s handouts with no alternative mean of income. Then it stopped all together, which brought the whole Kurdish economy to a standstill. Now we are getting what is equivalent to bread crumbs from Baghdad in exchange for giving them crude oil. Over the long term this creates a highly dependent, non-productive economy.
Again the question is how could this have been avoided? This may seem simplistic, but there could have been another way of using the twelve billion dollars that Kurdistan was getting, instead of just paying it as government wages to people. What I think would have been a better way of spending that money is for the K.R.G to have supported the private sector. How? By first creating the right environment, and body of laws. Second, by providing loans and subsidies for good projects. Third, by avoiding corrupt practices such as senior politicians having a stake in private businesses. Fourth, not allowing foreign workers to work in Kurdistan except for senior managerial and training positions.
The K.R.G could in return start a private –sector- hiring- program that would shift people from the government payroll to working in the private sector. As a result it would not have ended up with the cumbersome nanny state that we now have. Inevitably, because of competition and the profit motive, those people working in the private sector would have to be productive or else get the sack. Fat chance of that happening in the government sector!
In the end, the K.R.G needs to encourage private enterprise and bolster the private sector. That, in my opinion, is the best way to create a strong independent economy with a productive labour force.