Institute for War and Peace Reporting | Giving Voice, Driving Change

Privatisation Plan Drawn Up

Industry ministry hopes to persuade local and international firms to invest in state-owned concerns.
By Daud Salman

The industry ministry plans to partially privatise most of its 46 state-owned companies, as part of the government’s plan to establish a liberal free market economy.

Later this year, the ministry is expected to launch a search for domestic and foreign partners in the private sector to jointly run companies in the petrochemical, cement, sugar, silk and heavy industry sectors.

Initially, the ministry plans to privatise around ten small factories and companies that do not contribute greatly to the economy, such as those producing clothes and tyres.

“We have plans to develop and pave the way for domestic and foreign investment in these sectors,” said Mohammed Abdullah, acting minister of industry.

Under Saddam, only Arab countries were allowed to invest in Iraq. But the new commercial laws established by the Coalition Provisional Authority, CPA, allow foreigners to own 100 per cent of Iraqi businesses - the exceptions being those dealing with natural resources such as oil.

Iraq has around 200 state-owned enterprises, known as SOEs, and the government is looking to partially privatise or completely sell off many of these.

A high number of employees of state-owned companies have expressed anxiety over the privatisation plans, fearing job losses and business closures. Last December, more than a million bank workers in India shut down its 26 state-owned banks for a day in protest against the government’s privatisation plans.

“We are worried about privatising our companies in this way as we have no idea about the new owners,” said Hasan Mahmoud, technical monitor for the state-owned Cotton Products Company, which produces clothes.

A United Nations-World Bank assessment report supports the privatisation process but warns that it must move slowly to ensure it does not produce shocks in the economy, as state-owned companies employ about 10 per cent of Iraq’s workforce.

Faris Mohammed, director of the industry ministry’s petrochemicals sector, said Iraq needs the experience of foreign private companies because its own businesses have deteriorated over the past 30 years due to lack of maintenance and modern technology.

“Developing and reconstructing these SOEs needs huge amounts of money and we think the government right now is not capable of providing that amount,” he said. “That’s why new partners willing to invest.”

Economist Majid al-Soory warned that economic conditions in Iraq are not yet appropriate for privatisation. He said the government needs to form a special board to focus on privatisation and investment. “Investors need encouraging financial conditions to go into any sector,” he said.

And economist Imad Abdulrahman, of the Economic Studies Centre at Baghdad University, warned that it was important to protect domestic industries at the same time.

“The government also has to control free trade, like duties and taxes, and enable the owners of these industries to sell their products abroad for decent prices,” he said.

Daud Salman is an IWPR trainee in Baghdad.

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