Baltimore Sun

Iraqis ask, ‘Where do the millions go?’

Country rich in oil, but average citizens not seeing any gains

- By Samya Kullab

BAGHDAD — Waves of violent protests have engulfed Baghdad and Iraq’s southern provinces, with demonstrat­ors chanting for the downfall of a political establishm­ent that they say doesn’t prioritize them.

Fueling the unrest is anger over an economy flush with oil money that has failed to bring jobs or improvemen­ts to the lives of young people, who are the majority of those taking to the streets. They say they have had enough of blatant government corruption and subpar basic services.

At least 320 people have died, and thousands have been wounded since the unrest began Oct. 1.

“We are jobless and poor, but every day we see the flares of the oil fields,” said Huda, an activist in Basra, the province that accounts for the lion’s share of Iraq’s crude exports. She spoke on condition she be identified only by her first name for security reasons.

“Where do the millions go?” she asked.

It’s a good question.

Oil accounts for roughly 85-90% of state revenue. This year’s federal budget anticipate­d $79 billion in oil money based on projected exports of 3.88 million barrels per day at a price of $56 a barrel. Iraq’s economy improved in 2019 due to an increase in oil production, and GDP growth is expected to grow by 4.6% by the end of the year, according to the World Bank.

The fruits of these riches are rarely seen by the average Iraqi because of financial mismanagem­ent, bureaucrat­ic inefficien­cy and corruption, experts and officials said.

Overall unemployme­nt is around 11% while 22% of the population lives in poverty, according to World Bank estimates. A striking one-third of Iraqi youth are without jobs.

“One of the main problems is that the oil wealth is spent on the public sector, and especially on salaries,” said Ali al-Mawlawi, head of research at al-Bayan Center, a Baghdad-based thinktank.

Iraq’s brand of sectarian power-sharing — called the “muhasasa” system in Arabic — effectivel­y empowers political elites to govern based on consensus and informal agreements, marginaliz­ing the role of parliament and alienating much of the Iraqi population in the process.

On the ground, this dynamic has played out through a quota system whereby resources are shared among political leaders, with each vying to increase networks of patronage and build support. To do this, leaders have relied on doling out government jobs as a foolproof method to preserve loyalty.

This tactic has bloated the public sector and drained Iraq’s oil-financed budget, leaving little for investment in badly needed social and infrastruc­ture projects.

“That has been the approach,” said al-Mawlawi, “Patronage is based primarily on the provision of jobs rather than anything else. It’s the primary way to distribute resources — through the public sector.” In the 2019 budget, public sector compensati­on accounted for nearly 40% of state spending.

Iraq’s public sector grew in parallel with the developmen­t of the country’s oil industry following the 2003 U.S.-led invasion that toppled dictator Saddam Hussein. With major internatio­nal oil companies flocking to develop the country’s oil fields, the number of government employees grew threefold in the last 16 years, according to alMawlawi’s research.

Offering jobs is also a recourse used by Iraqi politician­s to quell protests in the past. Prime Minister Adil Abdul- Mahdi i ncluded thousands of hires in a reform package introduced last month. Experts said this approach only perpetuate­s the problem.

The trend is not unique to Iraq; oil-rich Gulf countries have experience­d the same. But the oil sector’s inextricab­le link to Iraq’s muhasasa system has created a “Frankenste­in version” of a typical phenomenon, said Ahmed Tabaqchali, a senior fellow at the Sulaymaniy­ah-based Institute of Regional and Internatio­nal Studies and Chief Investment Officer at Asia Frontier Capital Iraq Fund.

Because of muhasasa’s multiple, decentrali­zed networks, “instead of one single authoritar­ian doing the hiring, we have many hiring as if on steroids,” Tabaqchali said.

Following the money trail of how ministries spend their budgets is difficult even for well-meaning reformers because there is little transparen­cy and accountabi­lity.

The national budget has allocated i ncreasing amounts every year for “goods and services,” which can vary from public service projects to mundane expenses like maintainin­g a ministry building. But many complain little progress can be seen on the ground.

In some cases, the money is simply not spent because of poor planning and management, al-Mawlawi said.

Last year’s budget ended with a surplus of around $21 billion “not because we had too much money, but because we didn’t know how to spend it the right way,” he said.

Often, money earmarked for service projects by the government or internatio­nal organizati­ons gets spent by ministry officials for expenditur­es, said an Iraqi official, who requested anonymity because of regulation­s. Officials lump all the budgets together for spending and then “they always prioritize petty things and claim the money isn’t enough for the project,” the official said.

Or the funds are used to pay debts accumulate­d from previous years, the official said. “So when it’s time to sign the contract, they say ‘no money’ because what they have i sn’t enough.”

“There are thousands of ways bureaucrat­s can siphon it off,” the official added.

Crucial projects, meanwhile, remain incomplete.

School buildings in Basra, the province that accounts for the lion’s share of oil exports, are crumbling and overcrowde­d with multiple-shift programs.

On a recent visit to the Al-Akrameen school in the Abu Khaseeb neighborho­od, headmaster Abdulhussa­in AbdulKhudh­er said he had asked the Education Directorat­e for funding to refurbish the school building erected in 1972 but was told there was no money.

“I rely on parents and volunteers to give furniture, keep the place clean for students so they can get an education,” he said.

Nearby, another school stood desolate. A young girl walked by and explained that it was empty and the students had been moved to another preexistin­g school. “It will collapse any minute,” she said.

Iraqi leaders have been unwilling to reform the system, which experts said is unsustaina­ble because of limited resources and overrelian­ce on volatile oil markets.

Serious attempts were made following the 2015 financial crisis, when unpopular austerity measures were introduced by former Prime Minister Haidar alAbadi’s administra­tion. But when oil prices recovered, political pressure trumped strict spending measures.

 ?? KHALID MOHAMMED/AP ?? Protesters try to pull down concrete barriers during clashes with Iraqi security forces Sunday in Baghdad, the capital.
KHALID MOHAMMED/AP Protesters try to pull down concrete barriers during clashes with Iraqi security forces Sunday in Baghdad, the capital.

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