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Iraq's Economy

SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION IRAQ’S ECONOMY RAQ RECONSTRUCT www.sigir.mil [email protected] (703) 428-1100 JULY 2011 Iraq's Trade Balance $ Billions How the Iraqi Household Measures Up Interest, Inflation, and Exchange Rates CELL PHONE SUBSCRIBERS (PER 100 $80 80% 1,600 HOUSEHOLD INCOME $/MONTH ELECTRICITY SUPPLY (HRS/ OWNERSHIP INHABITANTS) OWNERSHIP DAY FOR AC) Inflation Rate $70 70% 1,500 COMPUTER CAR $60 60% 1,400 Exchange Rate $50 50% 1,300 Iraq 733 12% 64 27% 6-9 hours $40 40% 1,200 $30 Iran 704 34% 71 36% 24 hours 30% 1,100 CBI Policy Rate (Interest Rate) 1,000 $20 Saudi Arabia 20% 2,624 50% 174 86% 24 hours $10 10% 900 $0 United States 2005 2006 2007 2008 2009 2010 2011 0% 800 4,185 76% 91 84 % 24 hours $-10 Imports Exports -10% 700 $-20 Current Account Balance 2005 2011 GROSS DOMESTIC PRODUCT, BY SECTOR Share of Employment vs. Share of GDP, by Sector 2% Economic Reliance on Oil among Selected Middle East and North Africa Nations, 2010 Agriculture Manufacturing 60% Oil 4% ILibya 50% IQatar Other Iraq 40% 15% Kuwait Social Services 30% Social Services Saudi Arabia 20% I UAE Agriculture 47% Average Share of GDP 10% Sudan Yemen Bahrain Iran Oil Manufacturing 0% 2008-2010 0% 10% 20% 30% 40% 50% 40% 50% 60% 70% 80% 90% 100% % of Total Employment Oil Revenue as a % of Total Government Revenue % of Total GDP Electricity and Water 1% Building and Construction 4% Wholesale, Retail Trade, Hotels, and Related Services 8% Finance, Insurance, Real Estate, and Business Services 9% Transport, Communications, and Storage 9% Starting a New Business: Time/Costs To Meet Government/Legal Requirements OIL COSTS (% OF PER CAPITA INCOME) COUNTRY DAYS United States 1.4 Oil dominates Iraq's economy. It accounts for 98% of export earnings and about 90% of all government revenues, but employs only 1% of the work force. Saudi Arabia 7.0 Iraq sits on an estimated 143 billion barrels of proved oil reserves, the third highest country total in the world. Iran 8. 4.0 UAE 16 8.4 13 Iraq's oil sector needs major investment to repair obsolete, decaying infrastructure and expand production, storage, and export facilities to handle projected growth in volume over the coming decades. Syria 38.1 Value of Foreign Commercial Activity in Iraq, 2005–2010 $ Billions Oil production is projected by IEA to grow at twice the pace of any OPEC member during the 2009-2035 period. Natural gas production is expected to of Jordan 13 44.6 $42.67 2010 Iraq 17 107.8 47% grow at three times the pace any OPEC producer during the same period. Average Annual Growth of Oil Production, 2009-2035 Only 1.4% of Iraqis have a deposit account with a private-sector bank, and the percentage of those borrowing from such banks is even less. $1.17 2005 Actual Projected 4.1% Iraq. Turkey, Italy, France, and South Korea provided 65% of foreign commercial activity in 2010. The largest investment sector with foreign commercial activity was in housing/real estate. 1.6% Saudi Arabia Iran 0.8% How Well Countries Control Corruption World Bank Assessment 2009 2035 POORLY + + WELL SOCIAL SERVICES Iraq Jordan U.S. Iran Syria Şaudi Ārabia Government is the economy's single largest employer, providing almost 60% of all full-time jobs; subsidies for food and wages for the employees of state-owned enterprises constitute major national budget items. UAE Iraq Stock Exchange vs. S&P Pan Arab Composite Index % Change 42% Iraq's government has worked to reduce spending on public safety nets and other subsidies. S&P Pan Arab Composite Iraq Stock Exchange Public Spending on Safety Nets as a % of GDP, 2008 3% 15% Lebanon 1/1/2010 6/30/2011 Yemen Jordan Egypt 80% of all food consumed in Iraq Average Iraqi Electricity Supply and Estimated Demand, 2004-2010 Tunisia is imported. Iran MW Iraq Ease of Doing Business Rankings, 2011 Out of 183 Countries 10,000 2 4 10 8,000 COUNTRY RANK 6,000 AGRICULTURE United States 4,000 2,000 Saudi Arabia 11 This sector has lost its international competitiveness, leaving the land once considered the cradle of modern agriculture a major food importer. 2004 2005 2006 2007 2008 2009 2010 UAE 40 - Estimated Demand Jordan 111 Important Agricultural Crops: • Wheat • Barley • Sorghum Dates-a symbol of agriculture's decline In 1975, Iraqi dates dominated world markets, but by 2000 they had disappeared-a victim of UN economic sanctions. Efforts to regain global market share are hampered by obsolete farming techniques, increased water and soil salinity, and decaying infrastructure. Imports Iran 129 Power-plant Production Syria 144 4% Iraq 166 Between 2004-2010, the supply of electricity in Iraq has increased by 69%; at the same time demand has risen by 105%. The Council of Ministers has passed and sent to parliament an infrastructure investment program that earmarks $5 billion for irrigation and other agricultural needs. Date Exports (Iraq vs. All Other Countries), 1975-1999 percentage point increase in the agricultural sector's share of the GDP could produce an additional 55,000 jobs for the economy. Thousand Tons 600 UN Sanctions 400 200 Exports/Imports, Ease and Cost П PORT PROCESSING TIME IN DAYS CONTAINER ($) COST PER '75 '80 '85 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 COUNTRY I Iraq IAll Other Countries United States 6/5 1,050/1,315 UAE 7/7 521/542 MANUFACTURING Saudi Arabia 13/17 580/686 The state-owned manufacturing sector was crushed by UN economic sanctions imposed after Iraq's 1990 invasion of Kuwait. Two wars and prolonged international isolation have left the sector in critical need of restructuring. Iran 25/32 1,090/1,735 Collectively, Manufacturing, Agriculture, and Social Services amount to 21% of Iraq's GDP, but provide more than half of all jobs. Syria 15/21 1,190/1,625 Iraq 80/83 3,550/3,650 Important Manufacturing Branches: • Cement • Petrochemicals • Pharmaceuticals 2% If the restructuring "roadmap" approved by the Council of Ministers restores competitiveness, a healthy manufacturing sector can diversify an oil-dominated economy, create jobs, boost productivity, draw foreign investment, and broaden Iraq's reintegration into the global economy. Drawing foreign partners' interest will not be easy unless politically difficult reforms make government- owned enterprises competitive in a market economy by trimming payrolls and implementing modern production and management techniques. Annual GOI Subsidies for SOES $ Billions In the 1980s, Iraq's campaign to end illiteracy was praised as among the best in the Arab World. Public-sector employment grew from less than 1 million in 2004 0.91 2.56 2.91 2.16 2.45 Today, literacy rates are dropping, and 20% of Iraqis aged 10-49 can neither read nor write. to more than 3 million in 2009. 2007 2008 2009 2010 2011 (Photos courtesy of BP) GDP, by Sector, 1970-2009 $ Millions, Purchasing Power Parity at Current Prices Iran-Iraq War Oil for Food Program 160,000 Second Gulf War; U.S. funding for Iraq reconstruction begins Peak year for U.S. funding of Iraq reconstruction Ba'athists consolidate power following 1968 coup Iraq invades Kuwait; United Nations imposes comprehensive sanctions 120,000 First Gulf War Saddam Hussein becomes president Social Services 80,000 Manufacturing Agriculture Iraq nationalizes Iraq Petroleum Company (IPC) 40,000 Other Oil 1970 '71 '72 '73 "74 '75 '76 '77 '78 '79 1980 '81 '82 '83 V8, '85 98, '87 88, '89 1990 '91 '92 '93 '94 '95 '96 '97 "98 '99 2000 '01 '02 '03 '04 90, '07 SO, 60, 80, PROFESSIONALISM PRODUCTIVITY PERSEVERANCE For the sources of information used to create this insert, please see the last endnote in this Quarterly and Semiannual Report. SPECIAL I Interest and Inflation Rates Exchange Rate (Iraqi Dinar/$) Oil Revenue as a % of Total GDP

Iraq's Economy

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Created for the Special Inspector General for Iraq Reconstruction July 2011 Semi Annual and Quarterly Report, this infographic pull-out was created to summarize one of the main themes focused on in th...

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