The KRG Economy: Booming or Dooming?

By Harem Karem and Kamal Chomani:

The Ibrahim Khalil and other border points have generated huge revenues - for whom?

The Ibrahim Khalil and other border points have generated huge revenues – for whom?

‘Kurdistan is booming’ was the Kurdistan Regional Government (KRG) oligarchy’s catchphrase – often echoed by short-sighted foreign businessmen – over the past decade. Undoubtedly, there has been development: hundreds of hotels and skyscrapers have mushroomed in the region, the standard of living has improved in comparison with the civil war era, and public services have improved to some extent.

However, this ‘booming economy’’ – or, as we call it ‘capitalism on steroids’ – hasn’t been due to the smart strategic planning of astute visionary members of the oligarchy. Instead, it has been primarily due to the billions of dollars poured into the region following the invasion of Iraq, mainly through international development programs, large-scale international money laundering and natural resources exporting – smuggling through the backdoor or by official routes.

Since 1992, for example, tens of millions of dollars per day have been generated at the border points with Turkey and Iran such as Ibrahim Khalil, Hajyomaran, Bashmakh and Khanaqeen. Until recently this income was not officially recorded and it was often appropriated by the dominant political parties, the KDP (Kurdistan Democratic Party) and PUK (Patriotic Union of Kurdistan). Even now there is a lack of transparency surrounding these funds.

As a result of the lack of long-term planning, mismanagement and the oligarchy’s attempt to thwart progress and divert projects for its own gain, most developments have benefited a tiny gang of greedy, money-munching monsters at the heart of government, while the majority of ordinary citizens have struggled to make ends meet.

By implementing half-baked populist policies to keep the populace submissive and prolong their exclusive grip of power, the oligarchy has deliberately promoted complacency and low productivity by creating a deformed welfare state – assigning nearly 80% of the national budget to a dole scheme and rewarding their hordes of lackeys by distributing public lands, luxurious cars and lucrative salaries at the national expense.

Such schemes have paved the way for thousands of villages to become deserted, the countryside abandoned and agriculture for internal consumption neglected throughout the region. Take the example of Sakran, one of 400-plus villages in the Choman area, situated in Eastern Choman (120 km North-East of Erbil). Until the nineties, it was self-sufficient and, what’s more, selling its products in the market. Sakran was a well-known agricultural brand in the Erbil province. All the people of this village were farmers. But, as a direct result of the KRG’s failed policies, the village is now deserted, with all its people living in the city and most receiving hand-outs from the KRG. Furthermore, local crafts have disappeared at an alarming rate: local products are fast becoming extinct, despite the fact that, historically, the region was self-sufficient through the centuries, resisting many calamities.

The ruling parties deliberately ignored the real needs of the countryside, putting farmers on the dole because they wanted to buy votes and strengthen their private militias. Sadly these local despots have managed to inflict a huge damage on society in two decades which the enemies couldn’t achieve in nearly a century. There is a saying among Kurds: “An axe cannot cut down a mighty oak-tree if the handle isn’t made of itself”.

The clientelist and kleptocratic practices of the oligarchy have paved the way for monumental failures politically, economically and in terms of government performance as well as the burgeoning grievances of the populace. The oligarchy has been wielding its axe to tear apart the society (‘divide and conquer’), running a patronage system to maintain a disproportionate hold on every aspect of power and business, together with multi-million-dollar, state-of-the-art propaganda machines to launch mass deception campaigns. How many millions, for example, are being allocated from the KRG budget to the Rudaw media empire owned by the prime minister?

In the words of the current finance minister, who took office less than a year ago as part of the coalition agreement, “out of almost 30,000 employees in the ministry, half of them do not exist”. Corrupt officials have registered their associates and party supporters to receive salaries without doing any work. It can be suspected that essentially the same is true for the rest of the ministries and local authorities.

Our quarrel here is not with those suffering from the KRG’s fraud and deception but with the oligarchy and those propagating its failed policies and corruption. Blinded by their own self-interest, and to feed the populist welfare state they have created, the oligarchy has pursued a myopic oil policy since 2007 without any due regard to existing oil and gas laws and ignoring national interests and experts’ warnings about the recklessness of putting all the eggs into one basket. Today, with the oil price at a record low, the total oil revenue at its best wouldn’t exceed $500 million each month, while the welfare state they have created requires $711 million. Additionally, the KRG needs $334 million to provide electricity every month and more than $200 million to protect its borders with IS and support the internally displaced people.

The oligarchy blames the budget dispute with Baghdad for all these problems, diverting attention from its own greed and lack of a viable economic strategy. Furthermore, the Kurdish oligarchy has been deeply involved with Baghdad since 2005, holding the positions of Iraqi presidency, deputy prime minister, deputy parliament speaker and several ministries including finance and foreign ministries.

The fact is that, over the past decade, more than $100 billion (and this is just the declared income) has poured into the KRG’s coffers and, not only has it failed to invest this wisely, but today the KRG owes nearly $18 billion – mainly to the oligarchy-owned giant companies and banks! We can safely say that the hundreds of luxurious hotels and skyscrapers are no substitute for what the region’s people urgently need: thousands of school buildings, hospitals, roads, dams and social wellbeing programs to look after the large numbers of people living below the poverty line.

There is a lack of official statistics but tens of thousands of the elderly have not received their pensions for the past three months. They turn up to their local bank each month only to be told it hasn’t got any money. Hundreds of thousands of teachers and other civil servants haven’t received wages for December, January and February. We know that most are struggling with their food and heating bills and those who live in rented accommodation or have a sick family member can often survive only through charity.

In conclusion, the booming economy has mainly benefited the corrupt political elite (oligarchy): many of them rapidly became millionaires and billionaires, while a majority of citizens are now seeing a dooming economy with increasing calamities.

3 Responses to The KRG Economy: Booming or Dooming?
  1. Kuvan Bamarny
    March 9, 2015 | 08:58

    I only want to quote a saying from a humanist man, “When arrrogance,false pride, greed and selfishness overcome mercy, love, care and sense of humanity and responsibility, consciousneess becomes blind, virtue and duty ethics die in him/her, respect for law and code of conduct become meaningless in the sick minds and hearts of egocentric, ignorant, narcissistic, megalomaniac individuals.”

  2. […] Barzanis and Talabanis simply extracted a forced loan. Of course, teachers are not alone. The KRG owes numerous contractors money and, in all likelihood, compound […]

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