The emphasis on investment as a basic and strategic component of a country’s economic and social development should perhaps not be overdone. It is not, of course, the only component, for there are other strategic factors, such as entrepreneurial ability, the required skills and know-how, the efficient utilization of resources, political and social stability, and other elements that complement the factor of capital. But investment remains one of the most important determinants of a country’s economic growth. An examination of Iraq’s investment policies at this point is thus quite timely, particularly in view of the special conditions the country is currently experiencing after its emergence from a war that proved long, costly, and far-reaching in its economic and social ramifications
Naturally, macroeconomic policy (financial, monetary, trade, price, and wage), as well as foreign exchange, plays a major part in investment policy and in determining general investment trends. They also have important implications for development strategies and thus for investment strategies in general.
Our aim in this study is to examine the investment policies of Iraq and their evolution from 1 950 to the present, focusing on volume of investments, their sectoral distribution and impact on development, the relative share of the public and private sectors, the position taken regarding foreign investment in the country, and the role of macroeconomic policies and their effectiveness in this regard.
lt will become apparent in the course of this discussion that three strategic variables were most influential in the determination of
Iraq’s investment policy and trends for the period under consideration.
- The oil factor, or more specifically, oil production, exports, and revenues, and the foreign exchange generated. (Iraqi investments, which contain a high foreign component, were heavily dependent on this factor.)
- The social imperatives of the ruling party.
- Political changes that have occurred in the country since the fifties and seventies.
These three variables directly influenced general trends in the country’s investment policies in terms of the role of the public and private sectors, the role of domestic investment, and, finally, in terms of the nature and impact of international monetary, financial, and development policies on these national investment policies.
Perhaps the most important activities reflecting such policies were the national construction and development plans announced by successive governments during the four decades since 1950. It is both natural and logical to turn to these primary sources for basic information on the evolution of investment policies in Iraq during this period. But the emphasis will ultimately be on contemporary investment policies, that is, those of the late 1980s. However, this period is marked by Iraq’s recent emergence from a hard and protracted war that dragged on for some eight years. The war was a major factor behind the reconsideration of a number of economic and social imperatives that had prevailed in the seventies and the first half of the eighties. It will become apparent in the course of this study that political changes in 1958 and in the decade that followed led to basic changes in the country’s investment policy. Oil was also pivotal in inducing change during the fifties, and then again in the seventies. However, at every stage, the social and political perspectives of the ruling party tended to color the general direction of these changes, because the process of development in Iraq-and thus Iraq’s investment policies-was not subject only to economic considerations but also to other, noneconomic considerations. These noneconomic considerations nevertheless permit one to gauge the achievements of the policies, their performance, their shortcomings, and their evolution in terms of size, direction, and impact in every sphere, economic, social, and political.
Given these (noneconomic) considerations, which were linked in turn with the economically and politically strategic factor of oil, our examination of the evolution of Iraq’s investment policies over the past four decades will be within the framework of the economic and political changes that occurred during that period. The first stage is from the early fifties up to 1958, the second is 1 958-64, the third, 1964-68, and finally, 1968 to the present. A significant part of the long stretch from 1968 to the present was dominated by the war between Iraq and the Islamic Republic of Iran, which continued until August 1 988. This phase witnessed important economic developments that began in 1982 and acquired practical importance for Iraq’s investment policies as of 1987. These developments will continue to have a major impact on investment policy well into the next decade.
In this context, our investigation of Iraq’s investment policies has been divided into four parts. The first part considers the evolution of these policies in terms of the development plans approved during each phase, namely, the decade of the fifties up to 1958, the sixties up to 1968, the seventies up to 1980, and finally the war years of the eighties up to the present. For each phase, we shall consider the volume of investment and sectoral allocations after discussing briefly the economic and noneconomic factors influencing every aspect of investment policymaking.
The second part of this study considers the status of these policies vis-a-vis the public sector, private sector, and the role of each in the national economy.
The third part considers briefly the position adopted regarding foreign investment in the country, while the fourth part attempts to examine the role of macroeconomic policies in the national economy generally. This includes the effectiveness of financial, monetary, price, and trade policies, foreign exchange, wages and salaries, and the impact of these variables on the size and mode of capital formation, on economic resource utilization and distribution between the various productive sectors, on the amount of foreign exchange earned, on the balance of payments, and, finally, on the level of economic performance in general and economic growth in particular.
This examination should enable us to arrive at definite conclusions regarding investment policies in Iraq and to forecast just what can or cannot be achieved during the next decade, within the limits of uncertainty that such forecasting entails and the relative conservatism of our estimates.
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Source: Book “Investment Policies in the Arab Countries
Papers Presented at a Seminar held in Kuwait, December 11-13, 1989”
IMF E Library