Iraqi Kurdistan: No sustainable economic development

Mohammed Hussein

By Mohammed Hussein:

Usually, officials in the Kurdistan Regional Government (KRG) show Kurdistan’s economic situation as a successful story of economic development. This ‘successful’ story has been used mostly as political propaganda by the KRG ruling parties, where it has been claimed as an achievement of their economic policy. Beside the KRG’s officials, sometimes well-paid journalists from local partisan media refer to extended parts of Kurdistan’s city centers and their huge towers as symbols for the alleged ‘economic development’. Simply questioning what they call economic development could lead readers to confront the problematic usage of the term in Iraqi Kurdistan. However, there is no economic development in Iraqi Kurdistan, and what has been presented as reflections of this term are just some phenomena of an oil-dependent economy.

To understand what does economic development means and how the KRG’s story is decorative propaganda, it would be better to appeal to the business dictionary definition of the term; it defines it as “Progress in an economy, or the qualitative measure of this. Economic development usually refers to the adoption of new technologies, transition from agriculture-based to industry-based economy, and general improvement in living standards.” By this definition, it is easy to see how the Kurdistan’s economic situation can’t match the term. Worse than this, it could be classified as a corrupt oil-dependent economy since Kurdistan’s economy has no exports except natural sources, exclusively oil, and both the KRG and the people are totally depending on oil revenue.

To clarify how the KRG’s economic situation is far from real economic development, it is necessary to reveal some basic facts. More than 95% of the KRG’s budget is dependent on oil revenue. Almost the whole budget is spent in service sectors in the outdated corrupt method, like in any Middle-Eastern country. According to Michael M. Gunter, “Crony capitalism and nepotism are rampant, and the public payroll gobbles up approximately three-quarters of the KRG budget.”(Middle East Policy Council) This situation could be classified as one of the failed Middle-Eastern corrupt examples, like the Gulf Arab States, but it is difficult to show it as a developed economy.

The main problem here is not having infrastructural reflections of the KRG’s fake “economic development,” and it also can’t be seen in a development of people’s social well-being. Right now, more than at any time before, Kurdistan’s citizens have polarized into two different classes: a small group of extremely rich people contrasts with a majority of the poor class and those middle class urban residents who feel a real threat to their economic position. The problem is that all these economic and social changes happened not by the more usual economic dynamics; it was created because of politician’s monopoly of local markets and smuggling oil which recently became one of the most effective ways of getting rich quickly.

Again, to have a real economic development, constant actions of policy makers are needed, and these should be in ways that promote people’s standard of life. The term symbolizes quantitative and qualitative changes in the nation’s productivity and economy. What the KRG has done so far is really far from these goals. According to the latest report on poverty in Kurdistan, 13% of the population of Iraqi Kurdistan lives below the poverty line. (Kurdish Aspect)  With this terrible poverty, it is difficult to talk about a success story in term of developing human capital and improving people’s life standards. Derek Monroe, a reporter from Foreign Policy in Focus reported that, in the KRG economic sphere, the ruling parties own most of the lucrative businesses in Kurdistan like the cellphone companies, big shopping malls and non-transparent oil deals. Even he said, “No one exactly knows where the oil income goes.”(Kurdistan: The Next Autocracy)

Beside the organized corruption, the lack of productivity is another major problem for Kurdistan’s economy. Except for the oil sectors, the KRG’s economy has zero exports, although there are huge potential human and natural resources within the proper environment. The KRG gets its annual budget from oil revenue, and Kurdistan’s citizens also get their incomes from the KRG. This vicious circle of economy has been continued in Iraqi Kurdistan since 1991, when the people ousted Saddam Hussein’s regime in the region by a popular uprising. What the KRG leaders called economic development can’t make sense within this empty circle, and they have just promoted some aspects of oil dependent consumption or rentierism.

Back to the conceptual problem, the KRG’s economy does not have features that characterize economic development. It is also not on the right track to achieve this in the near future in many cases. Lacking strategic projects that are necessary to build a strong infrastructure and running whole economic activities by a corrupt political elite are problems that prevent Kurdistan’s economy from becoming developed. Even Kurdistan’s oil sector, which both the KRG and its people have depended on to meet their economic demands, has serious problems. How this sector has been used is a good indicator of the overall economic situation of Kurdistan.

The way that KRG officials have managed the oil sector is really destructive to Kurdistan’s environment, and it poses real threats to some local roads. Kurdistan’s oil has been sold in two ways: the first one is under the Iraqi federal government’s control which is selling it through Iraqi pipelines, and its revenue is used to provide Iraq’s national budget, including 17% of Kurdistan’s share; the other part has been sold by KRG officials, and no one as yet knows where this revenue has gone, as Monroe mentioned.

Moreover, what KRG officials do is not just smuggling Kurdistan’s oil, they also destroy those local roads which are used to transfer the oil by tankers. This situation just puts obstacles in front of real development. Consequently, Kurdistan’s roads seriously get damaged, and the smuggled oil is sold at very cheap prices.

Beside this organized smuggling and corruption, there is no sufficient plan for developing Kurdistan’s economy, and the announced policy is really different from what has been implemented on the ground. For instance, Dr. Zeki Fettah, Economic Advisor to KRG Prime Minister Nechirvan Barzani, said, “The aim of the KRG’s strategy is to develop Kurdistan’s physical, natural, and, above all, human resources, in order to develop the economy to the long-term benefit of the people” (Fettah). This is a proper aim for a real economic development, but it is not an economic policy has been implemented so far. This strategy can’t work with smuggling Kurdistan’s oil by tankers and organized corruption.

 Mohammed Hussein lives in Slemani where he is an editor for  In the last two years he has reported from Iraqi Kurdistan for various Kurdish and English publications. He has also worked as a translator and translated three books into Kurdish.


Abdulla, Mufid. “South of Kurdistan: how we can eradicate poverty?” Kurdish Aspect June 16. 2010. Web. 29 September. 2013.

Economic development. Business Dictionary. 

Fettah, Zeki. “The KRG’s economic development strategy.”Kurdistan Regional Government 25 January. 2009. Web. 29 September. 2013.

Gunter, Michael. “Economic opportunities in Iraqi Kurdistan”. Middle East Policy Council.Web.29 September. 2013.

Monroe, Derek. “Kurdistan: The Next Autocracy?” Foreign Policy In Focus 13 June. 2013. Web. 27 September. 2013.


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