ERBIL, Kurdistan Region - As government salaries and pensions in the Kurdistan Region fail to keep up with the rising cost of living, the gap between the rich and the rest widens. Even if everyone benefits from the better roads, employment opportunities and educational system the prosperity brings, a rising frequency of yellow Lamborghinis on the roads clashes with the egalitarian values of Kurdistan’s socialist history.
“In absolute terms there is no doubt that the situation has improved dramatically, in terms of GDP per capita, services, whatever you want to talk about. When you look at people’s perception, however, things are different. People are aware that differences have increased sharply in society,” says Dr. Anwar Anaid, political economist at the University of Kurdistan Hewler.
Today, the government uses the majority of its budget to provide employment and pensions, also a form of redistribution. Yet, the rapidly expanding private sector is becoming more visible, and not everybody understands this new market-oriented system.
Anaid emphasizes that markets have arrived on an economic level, but without cultural acceptance of that system.
“Markets are not concerned with the equal distribution of resources, but an efficient allocation of resources. That inevitably means there will be inequalities -- natural to the market system -- creating an incentive for people to improve their conditions.”
“Incentives” may prove an unusual concept to the many government employees who have worked months without pay due to ongoing oil revenue disputes with Baghdad. All Kurds are happy to see their society prosper, but many question why some benefit more than others in this new society, especially after years of collective struggle.
If Kurdistan is changing quickly, leaders of government and business must articulate a vision of the future, so that citizens can understand the economic revolution that is underway. This means publically addressing several key questions, Anaid says.
“What does prosperity mean? What sort of culture do they want for the future? How does the market model fit in with historical facts about Kurdish politics and society?”
According to Anaid, neither the Kurdistan Regional Government (KRG), the political parties nor the business community have answered these questions in a convincing way.
The government knows it has to reduce the number of people on its payroll. But it lacks a coherent strategy to introduce people into the private labor market. “You don’t see the state helping people help themselves. They’re just helping people, in terms of consumption,” the professor says with a laugh.
The government has started to address these issues. Last September, the Ministry of Planning unveiled a report called “The Kurdistan Region of Iraq: A Vision of the Future,” produced in cooperation with the RAND corporation, an American think-tank.
The 60-page document articulates the government’s plan for the future, identifying its top priorities in generating inclusive growth. It also presents five-year plans for specific ministries so that they may harmonize policy objectives across the government. Yet, whether the report is actually implemented in the ministries remains to be seen.
There are other factors that lead to economic division in the region. The Kurdistan Board of Investment readily admits that the majority of new businesses and projects are launched in major cities, especially Erbil. The Kurdish capital received additional funds this year when the city was designated the Arab Tourism Capital for 2014.
In the short term, investing in major cities is crucial if Kurdistan is to be a center of international trade. In the long term, however, the professor stresses that the fate of rural communities must be addressed if they, too, are to benefit from growth.
Perhaps citizens in the so-called “disputed territories” (areas claimed both by the KRG and the Iraqi federal government) suffer the worst fate. Not only are these areas subject to security risks, but government support is minimal and private investors keep away.
Anaid says these zones face “double discrimination,” from the public and private sectors. Firstly, they must endure Baghdad’s financial mismanagement: The federal government went into deficit last year. Secondly, their unclear legal status means investment in disputed areas must be approved by both governments, which are frequently non-cooperative. The Kurdistan Board of Investment concedes most project proposals were rejected by the central government.
Territorial disputes and blocked budgets indicate not everything is in the KRG’s control. But 11 years after the fall of dictator Saddam Hussein, the KRG has the confidence and ability to shape its destiny. If its success is going to continue, leaders are urged to define what kind of prosperity is right for Kurdistan, and who is going to take part in it.
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