Let us Keep Kurdistan Safe: How to Ease the Budgetary Crunch

Last year, on 15 January, 2015, I published an article in the English edition of Rudaw, under the same title, “Let us Keep Kurdistan Safe”, which was read by over 5000 people. The main point I had emphasized then was that we must not depend solely on oil for our budgetary needs, and therefore we must find other financial venues to supplement the oil revenue. As oil prices have been on the decline, it is crucial that we think again, and explore ways of enhancing the national budget, beyond the oil revenue, to meet local demands and ensure a higher standard of living for our people.  

I believe that Kurdish Regional Government’s (KRG) economic and financial policy requires a careful review. It is suggested that a panel of experienced economists and advisors carry out this review, on the basis of which it would recommend KRG future economic and financial policy. They may require that KRG should curb its excessive imports of items that we can do without, or may suggest a raise of tariffs on imports that can be locally produced. It is obvious that current unrestricted imports has drained the national reserve and has put us in an unenviable economic crunch.

 
Our budget has also been burdened by an unexpected war at our doors, costing us dearly. Besides the oil sector, KRG has no other worthwhile revenue from any other sources to supplement its budget. I had earlier written that to depend solely on the oil sector for our budget is rather risky. Then, we need to explore other venues to augment the national budget, partly through restrictions on imported goods, and then through the rejuvenation of one of our most important sectors, the agricultural sector, to strengthen our economy and, to provide for our need of food and feed, and to engage in export opportunities of items that exceed local demand.

It is unfortunate that after 10 years of self-rule the supply of electricity remains insufficient. Water, health services, and education facilities have not been up to standard, in spite of an estimated US$100 billion that has been received during that period. Currently, the problem has escalated to a degree that KRG has not even been able to pay regular government staff salaries. Such a situation has not been experienced at any time earlier, including the difficult sanction years of the 1990s.  

As we all know, civil servants depend solely on their monthly salaries for purchasing of supplies for their daily living. The merchants likewise eagerly await the end of the month to accommodate the needs of civil servants. Therefore, non- payment of salaries, not only has paralyzed the life of the civil workers but has also jeopardized the total market environment.

Additionally, the KRG has not been able to pay hundreds of contractors who were executing public projects. Many of these have now declared bankruptcies and stopped working, resulting in large number of unfinished rehabilitation projects, and causing a further increase in the rate of unemployment. Further, our local banks are left without cash, due to unwise extension of credit, excessive cash flow out of the country, and through unsound banking operations. Such banks have not been able to honor checks from their clients or even to repay money owed to them. They have, therefore, totally lost public confidence.
  
Here we may ask just where have we gone wrong, and why have we failed in providing our citizens with the amenities they deserve?
 
Such questions are asked everyday and I do not wish to dwell on answering them here. However, I will try to take a positive stand and direct my efforts to finding solutions rather than dwelling on the past mistakes. I am sure that with courage and determination the KRG can find ways of getting out of the current budgetary crunch. So, let me first discuss where we can save money, and then, what can we do to find sources of funds whereby the budget can be supplemented. 


1. A sizable amount of funds can be saved through substitution of foreign imports of food items with those locally produced, or alternatively imposing required tariffs to eliminate competition. We have the land, the water, and the climate to grow just about every food and feed items we are importing. What we really need is a sound agricultural policy that will send back the farmers to their lands.

 With implementation of special incentives, such as provision of improved seeds, tools and farm equipment, fertilizers and biological control chemicals, and with improvement of the marketing facilities, we can rejuvenate our agricultural sector and produce the agricultural products we need. Implementation of a sound agricultural policy, import restriction, and provision of technical and financial support to our farmers will give them the confidence they need to return to their farming profession.

2. We also need to support farmer’s union to strengthen their bargaining powers for purchases of agricultural inputs, and for further support for finding marketing opportunities.

3. Once the agricultural sector has been rejuvenated, we must start construction of agro-industries that produce cooking oil, pasta, tomato paste, fruit juices and jams, in addition to canned vegetables and fruits in addition to meat and wool processing.

4. Revival of the agricultural sector would also decrease the current high rate of unemployment and will discourage our young graduates to migrate to seek employment elsewhere. 

5. Under the reign of Saddam, farmers were forced out of their farms and were forced to live in collective camps, while many others vanished in the Anfal campaign. Their children never had a chance to learn farming and would need to be reeducated.  This can be done either through organizing a strong agricultural extension system or through setting up of special adult education program, in specific farming locations.

6. In order to encourage farmers to utilize their lands, I recommend that a land tax be imposed on any sizable agricultural lands left idle, aside from lands that need to be left idle as demanded by cropping rotation practiced on the farm. Landowners who are unwilling to engage in farming operations may be asked to relinquish their lands to other individuals or to agricultural companies willing to cultivate such lands. Under such conditions, a reasonable rent is expected which would be agreed upon between the two parties.

7. Another measure that would help farmers return to their farms is to facilitate a low interest loaning system through establishment of agricultural banks to be set up for this purpose.


With respect to other measures, I would like to add the following points for consideration.

1. Our private banks have lost public confidence, which is an unhealthy economic sign. It is important that the KRG takes action to bring back such confidence through enacting bylaws whereby some sort of guarantees are given that monies deposited at such the banks are protected. It is vital that business operations are carried out through the banks. At the same time the public should be encouraged to increase their use of local banks and to deposit monies available to them in such banks. These deposits can become an important source for project implementation in the country.

2. Kurdistan suffers from lack of both skilled and unskilled local labor. The KRG needs to carry out a review of all its employees to see if they could become an important labor force to engage in the implementation of ongoing projects, rather than having a sedentary idle job such as being only a symbolic security guard, without really undertaking any meaningful work. I suggest that those who fall in this category be transferred into a dynamic labor force who would be asked to engage in an activity wherever meaningful public work is being performed. Further, such a labor force could be leased to contractors who would employ them in their contractual works under specific terms of employment they agree upon. Large numbers of young, healthy people who have been assigned as “guards” are idle, attending to their work places only 50% of the time, while spending the remaining time attending to their own errands of driving taxis, or be hired as a labor to gain extra cash during his leisure time. 

3. Similarly a contingent of staff assigned under the name of “consultants” need to be abolished. Only highly specialized staff with proven records must be employed, for a specific time required.

4. The KRG should declare a rule that, except for the sick, old, and the disabled, no one should be paid unless he or she is performing a duty. Salaried staff must attend their work and for the hours required by law. “Shadow” workers must be totally eliminated.

5. Our streets and highways have been overcrowded with thousands of personal imported vehicles. A higher tariff on personal autos and luxury cars can substantially lower such imports. I suggest that import of all personal and luxury cars be stopped for at least one year to minimize foreign expenses.

6. Initiation of an annual income tax system for those whose incomes pass a certain threshold is important. Monies received from such taxation added to those received from custom duties, real estate and land tax, can be an important source for salary payments. Oil revenue must specifically be used for developmental projects, such as for the agricultural and the industrial sectors. 

I am confident that we can produce about every food and feed items we need: Cereals (Wheat, barley, and maize) Potatoes, onion, legumes(chick peas, lentils, fava beans, etc.), plus all the vegetables and Fruits, in addition to oil crops(Sesame, sunflower, and soybeans). Sugar beet, aside from being a staple crop for the production of sugar, it can also successfully support an economically viable dairy industry. Its byproducts, leaves, tops and molasses are important feeding elements for a dairy industry. 


There is also much room for expanding our dairy and poultry farms. Vast range areas are available to satisfy our livestock, sheep, goats, and cattle, in addition to other multiple feed sources from maize, soybeans, cereal and leguminous byproducts coming off the agro-industries that would be set up in the area.

No doubt, starting any new enterprise would face specific problems, but as I mentioned earlier with strong determination, a sound economic plan and patience, everything is possible. To end this presentation, I call the attention of our esteemed leaders that we must emphasize the need for preserving the two precious endowments of Kurdistan, land and water. We should take both issues very seriously. As a mountainous country, Kurdistan lacks vast fertile lands suitable for agriculture. In the past few years we have been very negligent building housing settlement on valuable agricultural areas. We need strict laws to have settlement built on hilly or non-agricultural lands. The Ministry of agriculture must be consulted every time a settlement project is proposed, to insure that the land assigned for settlement cannot be used for agriculture. We have already lost a great deal of valuable agricultural lands in Kurdistan. We cannot afford losing anymore. 

Water is to be the main issue in this century for starting international conflicts, rather than the oil sector which was the cause for disputes in the past century. As we very well know, our rivers emanate from Turkey or Iran. These two countries have been active building dams, not only on the main rivers, Tigris and Euphrates, but also on smaller rivers. Iran has minimized the flow of Alwand River into Diyla Region, in addition to building of the Daryan Dam on Daryan River, which has significantly decreased the flow of Sirwan River in Halabja Governorate, affecting water availability for agriculture in Garmian. The two main dams that will affect Kurdistan from Turkey are the Ilisu Dam and the newly proposed Jezra Dam, both on the Tigris River. 

We must carefully watch our neighbors, Turkey and Iran, on their dam building activities and strongly object to any interference in the historical flow of the rivers that originate in these two countries. Serious negotiations should be started to ensure a fair play, and even better, to engage the international body in the current disputes. 

Nationally, attention also should be directed towards digging of excessive wells, and the need to build small dams to increase underground water in suitable areas. In building such dams or any larger dams for agriculture or for use in hydroelectric projects, extra care should given toward protecting the agricultural lands that would be inundated in such operation.

Jamal Fuad, Ph.D., retired, former Minister of Humanitarian Assistance, KRG/Sulaimani, Iraqi Kurdistan. Retiree, FAO and the World Bank, International Agricultural and Development Consultant.