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In-depth Business Intelligence
Books on Iraq
REPUBLICAN REFERENCE
Area (sq.km)
437,072
Population
24,001,816 (July 2002 est.)
Capital
Baghdad
Currency
Iraqi dinar (IQD)
President
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Update No: 028- (25/08/05)
Still waiting for a constitution
The constitutional debate continued to dominate the news on Iraq during
August, mainly because of the delay in reaching a deal. The main stumbling
blocks remain the same, namely federalism and the degree of autonomy to be
granted to the Kurds. The Kurds already won some concessions, such as the
adoption of Kurdish as the second formal language of the country and the
recognition of their Peshmerga militia as an official force to secure northern
Iraq. However, they demand more, including an increase of the share of state
revenue from 17% to 50% and the inclusion of Kirkuk and parts of Mosul within
the Kurdish region. Their main prize remains federalism, however, and for this
they seem likely to settle for a 25% or so share of government revenue.
Federalism is mainly opposed by Sunni politicians, who see it as a ruse to
divide Iraq one day. Shiite and Kurdish politicians agree on federalism although
with some qualifications, but are debating how much revenue should be left to
the regions. The risk that an agreement on the constitution might have to be
postponed by several months is considered a serious danger by the Bush
Administration, who unwisely insisted on setting a deadline for the talks and
trumpeted it as a key benchmark of progress in stabilising Iraq, despite all the
indications of a complex debate ahead. A draft constitutional document is now to
go to parliament, but it is without the agreement of the Sunni negotiators and
the Sunni minority is of course, because of their tiny election turnout, heavily
under represented in that assembly. No doubt much energy will still be devoted
to seeking to cut deals with the Sunni representatives but, as of now, there is
absolutely no room for optimism in the circumstances, despite President Bush's
upbeat comments.
The constitutional debate is not the only cause of friction between
parliamentary factions in Iraq today. Although officially disbanded, party
militias continue to operate and to bully opponents. A typical example was the
removal of the mayor of Baghdad by the Badr Organisation, a militia affiliated
with the majority Shiite Alliance in Parliament. Although the replacement mayor
had been elected by Baghdad Council, his installation in power respected neither
the timing nor the procedures. Another area where friction could emerge is the
fight against corruption. The case concerning corruption at the Iraqi Defence
Ministry has been gathering pace during August and several enquiries have now
been opened. An official from the ministry has already been removed from his job
because of alleged corruption in a deal with Poland.
IMF reconsider growth forecast
In August the IMF issued a report on the Iraqi economy, which lowered the
GDP growth forecast to 3.7% for 2005, down from an earlier forecast of 17%.
Given the high oil prices on the world markets, this was hardly a sign of a
positive trend, despite claims in part of the press that it showed how the Iraqi
economy is not being destabilised by the insurgency. Moreover, the IMF report
warned the Iraqi government of a likely shortage of cash in the second half of
the year, as it predicted lower oil exports and tax revenues lower then
expected. Finally, inflation is reckoned to have been at 37% in the year through
to June, which makes earlier forecasts of a 15% inflation rate for 2005 unlikely
to be met. According to the IMF report, contractors and donors now report that
costs related to security and insurance account for 30-50% of the total. Only
US$103 million of the US$1 billion deposited by donors in the reconstruction
fund has been spent so far.
Electricity supply improves
A positive development was in July the fact that Iraq's electricity supply
finally reached the pre-war level, at 5,350 megawatts. Electricity shortages,
however, continued, due to the high summer temperatures which force many to use
air conditioning. In part the improvement in supply was due to imports from
neighbouring countries, with even more imports forecast for August, with the aim
to increase supply to 6,000 megawatt. The problem is however that these imports
are too expensive for a government which is widely expected to run a serous
budget deficit. This year US$300 million have already been spent in electricity
imports and the forecast for next year is US$1 billion. The increase in domestic
production of electricity is much slower, with just a new turbine expected to
become operational later this year. Of the original US$5.6 billion in US aid
meant for electricity projects, only US$1 billion ended up actually being
invested in new plants.
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