Economic Insights – Baghdad
The Federal Financial Supervision Bureau has reported positive developments in Iraq’s national industrial sector in recent years. The Bureau emphasized that while Iraq heavily relies on oil exports for its federal budgets, there is a pressing need to effectively implement consumer and local producer protection mechanisms to enhance the industrial landscape.
According to officials, “The industrial sector represents a crucial component of Iraq’s non-oil economy. Strategies were adopted to encourage investment, particularly as outlined in the amended 2006 Investment Law, to enhance the operational efficiency of industrial companies. These companies aim to produce and distribute goods that adhere to recognized quality standards, meeting local demand.” It was noted that consumer staples like dairy products, soap, and oils are produced in standard formats, while custom-made products such as generators and voltage transformers are developed according to specific requirements from the Ministry of Electricity.
“Several companies have successfully obtained certification from the International Organization for Standardization (ISO), which attests to their commitment to quality management standards. This is especially true for Iraqi cement and food product manufacturers,” Saleh added.
**Issues with Production Capacity**
Saleh further noted that many industrial firms operate below optimal capacity due to outdated machinery and production lines, primarily dating back to the 1970s and 1980s. This reliance on antiquated technology has hindered their competitiveness in the market. Additionally, the national electricity grid’s inability to meet demand and the influx of imported products have limited the capacity for local products to compete on both price and quality.
To address these challenges, the Ministry of Industry and Minerals has initiated plans to rehabilitate and develop numerous industrial units through partnerships with the private sector, based on the amended Public Companies Law No. (22) of 1997. This framework allows state-owned companies to collaborate with foreign entities to enhance operational capabilities in Iraq, alongside utilizing the amended Investment Law No. (13) of 2006 to include public sector projects aimed at qualifying or operating in tandem with the private sector.
**Company Integration Efforts**
The Ministry of Industry has also pursued the integration of companies through Cabinet Decision No. (360) of 2015. However, many of these integrations have faced obstacles, such as the General Design Company, which has struggled to finalize its merging processes following prior government reforms. A lack of approved financial accounts for these integrated companies has further complicated matters, hampering the transfer of rights and obligations to the parent organization as mandated by the integration decision.
Saleh explained that the termination of contracts with these companies is managed through their legal departments, following contractual terms. There may be opportunities to extend contract durations to allow for completion, notwithstanding the ongoing audits by supervisory bodies to ensure compliance with contractual stipulations and applicable laws.
**Call for Protection Legislation**
Saleh advocates for the activation of the Iraqi Products Protection Law No. (11) of 2010 in light of the significant transformations within the Iraqi economy, including the openness of markets to international trade and the inundation of local markets with foreign products at competitive prices. This situation poses serious challenges for the establishment of a robust local industry and diminishes fair competition.
He further asserted the urgent need for reinforcing customs tariff laws, given that approximately 90% of Iraq’s federal budget derives from oil exports. Additionally, the Consumer Protection Law No. (181) of 2018 should be revived to safeguard consumer rights and ensure fair competition while protecting the most vulnerable segments of society.
Aziz emphasized the importance of protecting local products to bolster support for industrial enterprises and enhance their competitiveness against regional counterparts.
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