Iraqi Economists Network

شبكة الاقتصاديين العراقيين

The Iraqi National Economy

Iraq’s untapped economy of remittances. By Nazli Tarzi

Nazli Tarzi

The effects of the invasion in 2003 on various economic classes are missing from the debate.

Remittance money is an unextractable thread woven into the life fabric of diaspora communities worldwide. In times of war and economic downturn, remittances open a lifeline on which thousands of Iraqis relied before indiscriminate violence and occupation broke their country.

Individual families benefited most but were also hardest hit, unable to save or boost their income and living standards with private transfers. Old power structures built anew in 2003 heavily altered the nature of diaspora engagement as droves of Iraqis forced out by the US-led war 15 years ago broke ties without which there is no need for remittances.

Money earned abroad and sent home sharply declined due to economic lapses and the shocks that punitive sanctions caused. Emigration was activated not in 2003 but a decade earlier as the sanctions regime offered little for strongly educated classes.

An estimated 400 000 Iraqis applied for asylum in developed countries between 1990 and 2002 and their potential to drive development using remittances — unburdened by the constraints of foreign aid — remains unfulfilled. In the United Kingdom, out of 1,844 Iraqi asylum applicants only 368 were granted residence in 2017.

It might be logical to conclude that remittance patterns are dictated by whether physical and emotional links with one’s homeland remains intact. As distance grows, there might not be any one to cushion from negative income shocks. The potential to reduce the foreign exchange gap and generate returns beyond the domestic realm remain unrecognised.

More impressive than welfare effects is the use of remittances to drive infrastructural development in Nepal, Ghana, Kenya and Nigeria. By generating much-needed revenue, record drops in youth unemployment were experienced in these countries.

A similar stride of progress by India’s diaspora has driven knowledge and business exchange between host countries and their own, contributing to the rapid growth of India’s software industry. In Egypt, technology transfer and much-needed financial capital are the benefits that are reaped from its Western-educated diaspora.

In Iraq, the potential remains untapped.  Steadily mounting military expenditures have seen Iraq slide deeper into a recession that remittances could lift the country out of by shielding the economy against external shocks.

It seems that financial advisers have not looked hard enough into remittance flow as an alternative to foreign creditors and official aid, when channelled effectively into the national economy. The channelling of funds, whether from foreign aid or an inflow from external economies, becomes a strong determinant of remittance behaviour. Institutionalised corruption has given diaspora communities greater cause for concern and less cause to send funds home.

Beneath frequently waged wars and the costly defeat of the Islamic State, economic self-sufficiency is a hazy dream for poverty struck families. Increased income from remittances would uplift those communities morally and economically and stimulate more income at the macro level that could be fed into reconstruction projects.

Without fail, the foreign aid Iraq does receive is siphoned by local actors seizing opportunities to tighten the screws of their patronage networks. Sending home remittances is only advantageous if the revenue does not fall into the same hands.

Complicating matters further is Iraq’s diversity, culturally and intergenerationally in absence of a uniting nucleus.

The effects of the invasion in 2003 on various economic classes are missing from the debate.

Beneficiaries who rode the coattails of occupant powers have been stashing stockpiles of cash elsewhere.

Fifteen years on, few incentives to spur the economy exist.

Sectarian cleansing, land grabs, confiscation of homes and the return of the power-hungry, whose slice of the Iraqi cake is compromising growth, make the potential of remittances harder to actualise.

Migrating classes have taken what capital they could extract. Ties were gradually severed although not altogether as families put down roots abroad.

This had been happening before the US-led war by the class of political refugees, religious association and outlawed groups welcomed with open arms by Britain and the United States.

Surviving exile was an advantage religious associations and outlawed organisations capitalised on, using their connections to funnel money from Iraq and other exilic centres — Syria and Iran — to establish bases abroad. Al-Khoei Foundation is among a handful of exiled political organisations that exerted their political presence in London in absence of a legal basis back home.

Still, without foreign links and connection to the governments of host countries the intricate transnational money transferring operation would not have been possible. The entitlements these groups have been granted in the new Iraq allowed this process to continue. Large transfers extracted using religious taxing systems can either be an incentive for confessional communities or discourage those who distrust the handling of this revenue.

Abuse of office exhibited by the political class of dual nationals chosen to lead the post-Saddam regime has repulsed Iraqis from investing their hard-earned cash.

“Substantial sums continue to leave the country,” an Iraqi in London said. “Abuse of pension laws by dual citizens has gone undetected” by authorities but not the wider diaspora community.

He explained how many individuals were unlawfully receiving two pensions. Circumvention requires careful scheming, “some careful not to fly Iraqi airways so no lull appears on their records and they can avoid detection.” The phenomenon, he explained, is rife among British-Iraqis.

The potential for remittance-induced growth is eroded by perpetual warfare, political chess games, emigration and the blanket of corruption smothering growth.

The combined sum will determine whether remittances in the Iraqi context can smooth over the cracks of its retracting economy.

Limitations of existing options should have dealt a slap hard enough to awaken those in power to the benefits of Iraq’s untapped economy of remittances but has not.

Nazli Tarzi is an independent journalist, whose writings and films focus on Iraq’s ancient history and contemporary political scene.

Source:  The Arab Weeklym March 25, 2018


Comment here

%d bloggers like this: