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REVIEW OF EIGHT IRAQI PROVINCIAL BUSINESS AGENDAS By The Center for International Private Enterprise (CIPE) and Stars Orbit Consultants (SOC)

Executive Summary A provincial business agenda (PBA) is a vital tool for the local business community to encourage investment by stimulating business activity and economic growth. Private sector organizations in many countries develop agendas that help identify and prioritize the legislative and economic reforms necessary to advance their countries’ economies. Business associations, chambers of commerce, economic think tanks, and other stakeholders that participated in this project are a critical democratic constituency in Iraq. Their involvement in the advocacy and policymaking processes not only strengthens the economy but reinforces a democratic infrastructure that needs to be fostered and supported. The Center for International Private Enterprise (CIPE) started supporting Iraqi business organizations’ efforts to create PBAs in Anbar, Basra, and Najaf in 2008. Between that year and 2014, five agendas were developed in Salahaddin, Babil, Karbala, Wassit and Maysan. A total of eight provinces produced business agendas, all of which were presented to the provinces’ governors upon their completion. Through this process, local business communities first selected the economic sectors that are pivotal to advancing Iraq’s economy at the provincial and federal levels. Members of the business community then identified the main barriers to growth within each of these sectors and offered suggestions for eliminating or significantly lowering those barriers. In some cases, these suggestions required new laws or changes to existing laws; in others, increased cooperation within the business community and with local government agencies took precedence. This review presents findings and recommendations based on an analysis of the eight PBAs from across Iraq covering six broad sectors of private sector development. This was a grass roots, bottom-up approach to the business agenda process – designed to empower local actors so that they can influence national policy. The following analysis provides a prioritized list of persistent challenges and shared issues of concern across all sectors, along with proposed solutions for each. This document has been designed as a tool for advocacy at the national level. It is an amalgamation of the key points from each PBA into one succinct platform, highlighting only the most prominent priorities shared across all, or most, of the provinces that participated in the project. The major findings point to a lack of institutional capacity to affect change, weak infrastructure,

1 Executive Summary 2 Background and Methodology 5 Findings 5 Agricultural Sector 9 Construction, Infrastructure and Industry 12 Business Commerce and Trade 14 Tourism and Hotels 15 Investment and Banking 17 Education 19 Prioritizing National Level Issues 19 Lack of Enforcement (Implementation Gap) 21 Corruption 23 Burdensome Bureaucracy 24 Lack of Strategic Planning 24 Weak Infrastructure

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debilitating corruption, an absence of long-term strategic economic planning, extremely low levels of enforcement, burdensome administrative procedures to doing business, poor import control mechanisms, and the ongoing refugee and IDP crisis throughout the country. Background and Methodology Methodology The process began in 2006 with Kurdistan Business Agendas that ultimately took on a life of their own and led to major changes in Kurdistan regional laws governing the business environment in the entire region. Following this success, CIPE gathered representatives from business associations, chambers of commerce, think tanks and academia in the rest of Iraq to discuss economic affairs at the national level. These stakeholders agreed to work on PBAs in the rest of the country, starting at the provincial level in order to assess shared priorities with the ultimate goal of consolidating these commonalities for advocacy at the national level. The six major sectors examined in each of the PBAs are Agriculture; Construction, Infrastructure and Industry; Business, Commerce and Trade; Tourism and Hotels; Investment and Banking; and Education. These six sectors were agreed upon through a consultative process in each province. The Iraqi Society for Consumer Rights Defense (ISCRD) launched the first PBA initiative in 2008, focusing on Anbar, Basra, and Najaf. In accordance with the US Chamber’s Model for National Business Agendas, the team conducted sector-specific workshops with business organizations. The research team used the dialogue with these organizations to identify the main grievances related to each sector in the province. This model was followed for the remaining 5 provinces. Among the organizations consulted in the process were associations of agricultural engineers, farmers’ cooperatives, chambers of commerce, and societies representing beekeeping, fishing, date production, tomato farming, pesticide manufacturing, veterinarians, and tourism. Table 1.1 lists the authors of each PBA.

Table 1.1

Province Organization Authoring Provincial Business Agenda

Anbar Iraqi Society for Consumer Rights Defense ISCRD الجمعية العراقية لحماية حقوق المستهلك

Basra Iraqi Society for Consumer Rights Defense ISCRD الجمعية العراقية لحماية حقوق المستهلك

Babil Iraqi Society for Consumer Rights Defense ISCRD الجمعية العراقية لحماية حقوق المستهلك

Karbala Karbala Center for Studies and Economic Researches-Karbala Chamber of Commerce

ية في غرفة تجارة كربالءمركز كربالء للدراسات والبحوث االقتصاد

Najaf Iraqi Society for Consumer Rights Defense ISCRD الجمعية العراقية لحماية حقوق المستهلك

Maysan Iraqi Shams Al Janoob Association for Economic Development جمعية شمس الجنوب العراقية للتنمية االقتصادية

Salahaddin Sahara Organization for Economic Development منظمة صحارى للتنمية االقتصادية

Wassit Inbithaq Assembly for Development and Economic Development جمعية االنبثاق للتنمية والتنمية االقتصادية

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Understanding Iraqi Laws Many of the recommendations in the PBAs, including those that are relevant in all 8 provinces, require new laws or an amendment to current Iraqi Law. Since all laws are handled at the federal level, with the exception of Kurdistan, it is critical for advocates of these PBAs to understand how to change a law.

New laws can be drafted by relevant ministries and sent to the Shoura Council,1 which reviews these laws and sends it to the Cabinet. The Cabinet, which is appointed by the Prime Minister, submits bills to the parliament. Voting takes place in parliament after two readings and requires a simple majority of the 325 members in order to pass.

According to the Iraqi constitution, the President of the Republic can submit a new law to parliament, also a law can originate inside parliament itself if an adequate number of parliamentarians or the specialized committee sign and support the draft. Due to various interpretations of the constitution, the Cabinet has objected in the past when laws were passed without its consent and consultation. Recently, the courts ruled that parliament has the right to propose and enact laws independent of the Cabinet as long as those laws do not incur financial liability over the government or contradict an existing governmental program. Clearly, the legislative and executive branches of the Iraqi government are required to work together on any reforms. It is critical, then, that advocacy regarding the vital role of the private sector be directed at both branches of government. Champions within the President’s office, in the Parliament, and in the Prime Minister’s Cabinet are all crucial to effecting sustainable reform. The following table lists Iraqi laws relevant to the eight Provincial Business Agendas:2

Legislative Issue

Name of Law Relevant Ministry

Link (if available)

Budget Budget Ministry of Finance

http://www.mof.gov.iq/Pages/MainMof.aspx

Business Registration

Companies law no. 21 in 1997

Ministry of Trade

http://www.iraqld.iq/LoadLawBook.aspx?SC=220220065863677

Investment Investment Law no. 13

National Investment Commission

http://www.iraqld.iq/LoadLawBook.aspx?SP=FREE&SC=040120082853520&Year=2006&PageNum=1

Investment Law of Renting and Owning State Lands no. 32 of 1986


Imports/ Exports

Customs Law no. 23 in 1984

Ministry of Finance


1 The Shoura Council falls under the Ministry of Justice and is constituted of specialized legal experts and lawyers; council members review the draft laws coming from governmental entities or laws related to government administrative affairs, looking for discrepancies or contradictions with other laws. 2 In addition to the laws listed in the table, there are a number of draft laws that were shelved in the parliament despite their importance to economy. Among these are laws that would address social security. These laws have been used to pacify fears that private sector workers have regarding their rightfully earned retirement; until they are passed, that will remain a very serious concern for all those working in the private sector.



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Imports/ Exports

Customs Tariff Law no. 22 in 2010

Ministry of Finance


Imports/ Exports

Law of Central Organization for Standardization and Quality Control no. 54 in 1979

Central Organization for Standardization and Quality Control – Ministry of Planning


Imports/ Exports

Competition and Ani-Monopoly Law no. 14 in 2010


Imports/ Exports

Consumer Protection Law no. 1 in 2010


Anti-Corruption

CPA order no. 57 in 2004

Inspector General

http://www.iraq-lg-law.org/ar/content/%D8%A7%D9%84%D9%85%D9%81%D8%AA%D8%B4%D9%88%D9%86-%D8%A7%D9%84%D8%B9%D9%85%D9%88%D9%85%D9%8A%D9%88%D9%86-%D8%A7%D9%84%D8%B9%D8%B1%D8%A7%D9%82%D9%8A%D9%88%D9%86-%D8%A7%D9%85%D8%B1-%D8%B3%D9%84%D8%B7%D8%A9-%D8%A7%D9%84%D8%A7%D8%A6%D8%AA%D9%84%D8%A7%D9%81-%D8%B1%D9%82%D9%85-57-%D9%84%D8%B3%D9%86%D8%A9-2004

Anti-Corruption

Law no. 30 in 2011

Commission of Integrity

http://www.iraq-lg-law.org/en/webfm_send/1278

Anti-Corruption

Law no. 31 in 2011

Federal Board of Supreme Audit

http://www.iraq-lg-law.org/ar/node/2323

The Current Iraqi Context On June 10th, 2014, the self-proclaimed Islamic State of Iraq and Syria – referred to here by its Arabic acronym, Daesh – seized the city of Mosul in Nineveh province, the second largest province in Iraq. As of the time this document is published, Daesh has moved on to occupy several key cities in other provinces of Anbar, Salahaddin, and parts of Kirkuk. Many of these areas had already been experiencing stress that affected economic activity, since protests had erupted in December 2012. But Daesh changes the situation absolutely. The economy is virtually defunct: while certain goods are still allowed to move in and out of Daesh-occupied territory, many roads are closed for security purposes and the continuation of regular economic life is impossible. Even in places that have been liberated from Daesh, looting and the damage from battles has destroyed shops, roads, and bridges. The current context does not mean that the Provincial Business agendas are irrelevant, nor should it be used as an excuse to delay advocacy for much-needed nationwide reform. Because the economy is regulated at the national level, progress can be made that will apply now to the rest of the country and to Daesh-occupied territories once those places have been liberated.



http://www.iraq-lg-law.org/en/webfm_send/1278

http://www.iraq-lg-law.org/ar/node/2323

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Findings In this section, each of the six sectors will be discussed individually. Although there are different perspectives and problems faced by various provinces, there are many common issues. These will form the core of the national advocacy campaign and will constitute the analysis below. The “Proposed Solutions” section provides possible action items that either the Iraqi government or private business community – or, in many cases, both entities in a public-private partnership – should consider in order to improve the sector.

I. Agriculture The agriculture sector features most prominently in each of the eight governorates’ PBAs. This is also the sector that has seen the most positive development in recent years.

Common Issues Proposed Solutions

Lack of Enforcement (Implementation Gap) In many cases, problems have already been addressed through policy and regulations. However, these solutions are not being implemented or enforcement is not applied systematically. Examples include the Investment Law no. 13 in 2006, Customs Tariff Law no. 22 in 2010, Consumer Protection Law no. 1 in 2010, and Competition and Anti-monopoly no. 14 in 2010.

Raise public awareness of existing laws so citizens are empowered to demand their enforcement

Engage in organized advocacy from unions and business associations for enforcement

Fragmented Land Ownership Many of Iraq’s agricultural products require large areas for efficient production, but inheritance over the centuries and destructive land uses have yielded numerous small plots of land that cannot operate profitably. In these instances, farmers are often forced to find work elsewhere and abandon their land. In some other cases, illegal tribal occupation of previously owned plots of land contributes to the problem.

Raise awareness of profits from combining individual plots of land

Incentivize investment: small land holdings combined and subjected to modern technologies through agricultural production cooperatives will yield more crops and better profit for all owners involved. Cooperatives create economies of scale and are a popular method in countries including the United States and Europe.

Lack of Water, High Salinity There is a lack of effective dams as well as low levels of rainfall and poor drainage in the south as

Enforce laws that protect groundwater. Runoff of the waste produced by animals grazing on public

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a result of Baath regime mismanagement. The low supply of water is exacerbated by land exploitation and mismanagement; for example, high levels of salinity are exacerbated by excessive

irrigation and high levels of ground water. Use of primitive irrigation techniques contributes to the issue, as does pollution and runoff.

lands, for example, destroys water reservoirs underground.

Raise awareness to prevent agricultural exploitation

Engage in strategic infrastructure development in prioritized provinces, including modernized irrigation techniques. For example, dams can be built along the Shat Al Arab to avoid losing fresh river water to the salt. Other areas in need of dams and water-related infrastructure projects include Najaf, Diyala, Anbar and Kirkuk.

Initiate responsible preservation and operation of ground water, the main source of irrigation water

Explore private and state investment opportunities in rehabilitation of river resources

Outdated Technology Irrigation, certified seed use, veterinary practices, and methods of treating and preventing plant and animal diseases all suffer from archaic practices that have not embraced the latest technology and knowledge in these fields

Train farmers and attract investors in modern agriculture techniques; explore opportunity for study abroad to import best practices from Europe and regional experts

Develop government as well as private initiatives to support research and development on modern methods, including cost effective ways to adopt new techniques

Strengthen relationships between higher education and scientific research communities inside and outside Iraq

Expensive but Weak Infrastructure The lack of a stable electrical power supply coupled with the high costs of fuel required for generators degrades profits. The lack of paved roads, adequate storage facilities, processing centers, and markets further weaken the sector. Finally, there are a limited numbers of facilities for veterinarians as well as a low number of experts in that field.

Improve electricity infrastructure

Improve roads and other infrastructure projects

Further develop alternative energy such as solar and wind power

Create incentives for students of veterinary medicine

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High Costs and Limited Availability of Inputs The cost of seeds, fertilizer, and livestock feed are prohibitively high in some cases. This makes Iraqis unable to compete with subsidized products from neighboring countries.

Support agriculture through subsidies on inputs, as neighboring countries do, to make prices competitive within the region

Encourage private investors to import seeds and other inputs to create competition between private and public

Corruption Particularly among government bodies, corruption is a common problem that detracts from all aspects of economic activity. Specific problems have been reported about government loan programs and animal census programs.

Enhance good governance practices and promote electronic systems to reduce opportunities for corruption

Farmers unions and business associations engage in additional oversight, including public awareness campaigns and whistleblower programs

Create an ombudsmen to handle and investigate complaints

Support independent watchdog and whistleblower programs

Cumbersome Bureaucracy Particularly when it comes to private investment, bureaucratic and administrative procedures and regulations pose a significant barrier to doing business. The Investment Law no. 13, which applies to Agriculture as well as other sectors, is confusing and cumbersome. Coupled with the other issues above, there is considerable deterrent to would-be investors.

Increase access to information and transparency. Citizens and investors need to know procedures in advance to simplify processes.

Advocate to simplify processes in order to facilitate local and foreign investment and promote the development of new businesses

Increase incentives to offset deterrents, such as temporary tax exemptions for new investors and easing transfers of capital inside and outside the country

Lack of Long Term Strategy There is little or weak planning to address basic infrastructure challenges; sector-specific planning for storage centers, veterinary services, and irrigation are almost nonexistent.

Develop a consortium made up of private and public sector partners in order to develop a strategic planning framework for the agricultural sector

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Present strategies to the public as well as government, using media as means for spreading information and garnering support

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II. Construction, Infrastructure, and Industry

Along with agriculture, the sector spanning industrial activity, infrastructure, and construction is one of the most prominent areas of private sector activity in Iraq. Seven provinces included this sector in their PBAs. In general, the sector tends to be characterized by opportunism and an entrenched culture of corruption exacerbated by confusing legal and regulatory frameworks, including the need to liaise with multiple government bodies on large projects.


Lack of Stakeholder Unity Both private sector actors and the Iraqi government have failed to study and implement the major challenges facing this sector.

Raise awareness and align private sector organizations around proposed solutions

Advocate to the Ministry of Industry and other relevant agencies for government engagement to facilitate needs of the sector

Lack of financing, low technical capabilities Compared with their peers in neighboring countries, private sector actors engaging in infrastructure and industry are far behind. Financing opportunities and a lack of modernized techniques are at the heart of this challenge.

Explore options for free trade areas with neighboring countries to increase opportunities for knowledge and technology transfer and other joint projects

Relax legal frameworks regarding access to finance from public and private institutions; such access should be less time consuming and costly. These frameworks, including interest rates, are published by the Central Bank.

Loosen collateral requirements: instead of land only, project machinery or future profits should be considered

Incentivize partnerships between Iraqi firms and those from abroad

Improve opportunities for access to finance by reforming the finance and banking sectors – more on this issue discussed in subsequent sections

Implement concessional loan programs for the construction/ industrial sector, with preferential policies and fair interest rates

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Poor Planning There is a general planning deficit related to industrial projects, including housing, infrastructure, and others.

Introduce new master plans for the land allocated for industrial project

Increase coordination with other sectors in order to establish cross-sector planning frameworks that will promote business opportunities (such as consolidated agricultural centers, comprehensive municipal projects etc.)

Security Risks Transportation is challenging due to the increase in checkpoints and danger of terrorist attacks on the road. It is difficult and expensive to secure industrial sites for development. In general, many offices and companies in the sector are inactive due to the security situation.

Provide tax exemptions for projects that have ceased due to terrorism

Dramatically increase efforts to maintain security along transport routes. This requires advocacy and cooperation primarily with the Ministry of Interior.

Tribal Occupancy Tribes are illegally seizing lands containing petroleum or other raw materials.

Advocate and raise awareness among the public of negative effects of tribal occupancy

Enforce land ownership procedures and regulations fairly

Dishonesty and Corruption Extortion and bureaucratic procrastination as well as lack of transparency in government contracts have led to waste, inefficacy, and poor quality projects. Lack of quality control on cheap imports exacerbates the issue. Since this is not a sector-specific issue, but rather one that bridges all sectors and provinces, it is one of the top priorities of the national agenda

Increase and enforce transparency and government monitoring of approval processes. All government contracts should be published and monitoring of the bidding process should be handled by an independent commission

Raise public awareness about the damage of corruption

Increase requirements for procurement practices, including transparency in selection criteria and bidding processes

Increase and enforce monitoring and quality assurance on imported construction materials. The Consumer

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Protection Law no. 1 of 2010, for example, is not enforced.

Ensure equal consideration between State Owned Enterprises (SOEs) and private bidders regarding contract procurement

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III. Business, Commerce, and Trade

The business, commerce, and trade sector has been relatively active across Iraq, as it is in many ways the most accessible sector for individual citizens interested in developing private businesses. Seven provinces included this sector in their PBAs.


Complex Bureaucracy Fundamental aspects of doing business such as registering a business, obtaining loans from private and public banks, and other routine process are complicated by cumbersome and often confusing legal parameters. In many cases, the cause is that the systems in use and the laws themselves are outdated.

Reform legal parameters to simplify routine procedures and provide expedited processes for businesses. This is covered in the Companies Law no. 21 of 1997.

Enact and enforce anti-corruption policies that prevent extortion for routine procedures. Relevant government agencies that oversee these policies are the Commission of Integrity, the Inspector General, and the Federal Board of Supreme Audit.

Update methods of work to include online applications and processing

Poor Import Regulations Markets have been saturated with low quality goods. Health and safety issues should be considered alongside the economic challenges caused by this phenomenon. There is a general lack of supervision and monitoring of imported goods at border points as well as rampant financial and administrative corruption. This problem touches a variety of sectors in every province.

Enforce existing standardization and quality control requirements, including health and safety specifications. The law relevant to this enforcement is the Standardization and Quality Control Law no. 54 of 1979 as well as the Consumer Protection Law no. 1 in 2010.

Raise awareness about the economic and public health cost of unenforced import practices

Enact deterrent measures such as sanctions and criminal charges against violators. This will entail education and training for border personnel as well as oversight of the Economic Security Device branch of the security forces.

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Weak infrastructure Business operations in the commercial sector continue to be plagued by infrastructure limitations. This includes deterioration of roadways and bridges in some provinces as well as limited and irregular electrical power supply.

Accelerate implementation of infrastructure projects, especially those focused on electric power and those in commercial and industrial zones.

Encourage investment in infrastructure, including foreign investment

Advocate for approval of foreign investment on key infrastructure projects

Trade imbalances Trade imbalances have persisted throughout Iraq, with a relatively weak internal market and heavy reliance on foreign trade. Policies and regulations tend to be more lenient towards imports, with neighboring countries exercising more control on incoming goods.

Increase border controls and monitoring of imports

Weak profitability and high risk Underlying issues affecting profitability are high interest rates from private and public banks, high operating costs, unreasonable levels of taxation, corruption, and risk due to the security situation in Iraq.

Reduce taxation levels to promote business development

Consider tax exemptions for new businesses, entrepreneurs and investors

Reduce interest rates on bank loans and provide preferential policies such as interest-free periods

Increase oversight and security in the application of laws and the stabilization of the security environment

Corruption Again, corruption is endemic to this sector, particularly with regard to procurement and bidding for both government and private contracts.

Increase transparency and monitoring at the Central Organization for Standardization

and Quality Control, including spot checks

Increase transparency in procurement and bidding processes

Introduce electronic processing to decrease opportunities for corrupt practices

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IV. Tourism and Hotels

The tourism sector is highly underdeveloped and is not a priority for development in most Iraqi provinces even though thousands of pilgrims visit Iraq’s holy cities annually and many infamous archeological sites can be found throughout the country. Only four provinces included the tourism or hotel sectors in their PBAs.


Lack of Government Interest While the industry has economic importance in some provinces, it is not considered to be of strategic economic importance by the national government.

Hotel and Tourism Associations must organize efforts to raise the profile and recognition of the tourism industry through data-driven campaigns

Poor Maintenance of Historical Sites Although Iraq is rich with cultural heritage sites including religious sites, there has been little or ineffective exploitation of these resources as economic hubs for tourism.

Promote tourism infrastructure and related industrial projects in areas near ancient architecture and antiquities sites, shrines, churches, and religious pilgrimage destinations.

Advocate for increased government recognition and support for the development of historic and religious tourist destinations

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V. Investment and Banking

Historically, government entities have dominated investment and banking in Iraq, and both private investment and private sector banking are relatively new phenomena. Consequently, the sector suffers from a confusing legal and regulatory context, coupled with a generally low level of confidence in private banking by citizens as well as the government. Four provinces included the investment or banking sectors in their PBAs.


Complex and Cumbersome Operational Procedures The bureaucracy surrounding the financial sector is deleterious. For investment activity, procedures are particularly complex and time consuming, including multiple audits that deter activity. Even among local government institutions, there is confusion regarding the Law of Investment no. 13 in 2006. Of particular concern are perceived conflicts between this and other sector-specific laws such the Law of Renting and Owning State Lands no. 32 of 1986. Concern over the jurisdiction of different constituencies is among the most important reform priorities. For example, out of use land owned by government ministries is often not subject to the opportunities guaranteed in the Investment Law.

Review the sector at the national level, with a view to streamlining the legal and administrative environment. The Investment Law is a relevant part of this reform, as is outreach to the Investment Commission and developing a nation-wide investment map identifying all investment opportunities.

Issue necessary instructions by official institutions in order to clarify the legal procedures and authorize more efficient decision-making

Limitations on Private Commercial Banks Banking Act No. 94 of 2004, Articles 27 and 28, limit the work of private sector commercial banks

Review and reform the legislation and central legal instructions related to it, in order to maximize the benefit of the legislation

Low Confidence in Private Banks Both consumers and public banks lack confidence in the private sector, leading to limited benefits from these banks. In some cases, government entities refuse checks from private banks even if they are certified. Furthermore, hoarding cash

Issue instructions from the Central Bank regarding the relationship with private banks, and encouraging the use of services in the private banking sector

Raise awareness on the importance and safety of the private banking system

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rather than entrusting it to banks is standard among Iraqis. There are also weak or nonexistent liquidity and capital requirements as well as poor management of risk.

Increase transparency and good governance practices

Introduce modern technologies including improved ability to diagnose risks and improve efficiency of operations

Increase the oversight of financial institutions, create and enforce liquidity requirements and standardized lending rates

Consider adoption of Basel I Accord standards for capital and liquidity requirements.

Inflation and High Interest Rates Poor management of monetary and fiscal policies has left smaller private banks particularly vulnerable.

Change procedures of the monetary policy to control inflation including the increase of interest rates when necessary, and exchange rate of the Iraqi Dinar, or at least maintain stable exchange rates. This will require

coordination with the Central Bank.

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VI. Education

The private education sector in Iraq is relatively underdeveloped from a business standpoint; only two provinces included education in their PBAs. The phenomena of private tutoring is rampant throughout Iraq, and some teachers manipulate the system, leaving important material out of the regular class instruction in order to make additional money as tutors. This has contributed to a negative perception of private sector involvement in education. For businesses, the sector is generally perceived to offer limited opportunity for profit, and at the same time is not easily accessible for private investment due to complex regulations.


High Operating Costs The cost of operating private educational institutions deter investment across the sector.

Facilitate private and state loans to investors

Remove barriers to business, as mentioned in other sections

Improve security and infrastructure-related barriers, as mentioned in other sections

Government Apathy The government has not taken a great interest in private sector development in education. There has been a lack of land allocation for the establishment of new facilities and a refusal to recognize qualifications of private sector graduates

Issue laws addressing qualifications required for private sector credentials

Raise awareness of the role of the private sector in education

Poor Perception of Private Sector Education Both the demand-side (students and parents) and supply side (investors and educators) seem to have a lack of confidence in private sector education. The social norm makes most Iraqis favor governmental education, and the quality of private education is not assured by any universal standardization. Furthermore, investment requires high output and maneuvering complicated regulations.

Raise awareness of the value of private sector education both inside and outside Iraq

Provide social security for personnel in private education

Regulate standards for sector education as well as private tutoring

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Complex Bureaucracy As with other sectors, administrative barriers and confusing procedures deter private investment in Iraqi education

Revise administrative procedures to remove unnecessary deterrents

Raise awareness around most efficient procedures for establishing private institutions, such as routine procedures for investment projects

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Prioritizing National Level Issues While the preceding sections presented issues of common interest across provinces on a sector-by-sector basis, this section will present areas of common interest at the national level. These include issues common across multiple sectors, as well as those specific to the national context rather than any province in particular. I. Lack of Enforcement: In some cases, laws are simply outdated and were designed to support Iraq during a vastly different context. In other cases, new legislation or regulations have been developed but are not applied with equal force for all members of society and in all corners of the country. Both of these are called the “Implementation Gap.” Examples include laws protecting groundwater resources, laws preventing tribal occupation of land, quality assurance regulations (particularly on imported goods), certain aspects of the Law on Investment, and many others. While these laws and regulations are ostensibly supported by senior government stakeholders, the lack of implementation represents a breakdown in the governance system that leads to a chaotic and opportunistic environment for conducting business, and creates opportunities for corrupt practices. In many cases, as with the Law on Investment (which conflicts for example with the Law of Renting and Owning State Lands no. 32 of 1986), it also creates a confusing legal environment, where concerned parties do not have clear direction as to which laws should be followed.

Recommendation: Encourage the central government to issue clear directions, to include new rulemaking if necessary, to concerned provincial and national departments around the implementation of the relevant laws and regulations Recommendation: Create a “one stop shop” for registering business, which saves time and money Recommendation: Create provincial level investment maps that list the investment opportunities in each region Recommendation: Remove legal discrepancies between the Investment Law and other laws

Mechanism: Ultimately, the solution to addressing implementation gaps is to prevent them from occurring by building legal

and regulatory frameworks that harmonize different laws and foster effective implementation. Factors that

contribute to the implementation gap are the size of the state bureaucracy and its effectiveness; the

legitimacy and quality of the laws; the availability of resources to implement the law; barriers to economic

activities; vested interests; and the influence of local elites. Overcoming the implementation gap requires

building political will at the local and national level, which is essential in the process of adoption and

implementation of laws and regulations.3 Furthermore, reforms require significant human and financial

resources to implement laws. Reducing corruption, introducing manageable and realistic reforms, and

ensuring buy-in for reforms among key stakeholders.

Below are several steps that can be taken:

Survey businesses and government officials to understand where the Implementation Gaps are.

3 CIPE, “Improving Public Governance", http://www.cipe.org/sites/default/files/publication-docs/GI%20CIPE_Implementation%20Gap_for%20web.pdf

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Institute an advocacy campaign to educate the public and the business sector about their legal rights.

Outline steps that could be taken in order to enforce existing laws.

One common strategy is to hold roundtables with businesses, government officials, and civil society to

study the implementation gap and to promote dialogue.

Instituting “one stop shops” for the issuance of licenses, tax payments or other government issued

documentation simplifies administrative processes and reduces corruption.

For examples on how to overcome the implementation gap, refer to Improving Public Governance.

http://www.cipe.org/sites/default/files/publication-

docs/GI%20CIPE_Implementation%20Gap_for%20web.pdf

Case Studies: Closing the Implementation Gap

In Moldova, the business community issued annual reports that hold the government accountable for the pace and quality of reforms, outlined under the National Business Agenda, through a highly participatory monitoring process. The reports evaluate government compliance with business community priorities through a variety of tools such as meetings, interviews with representatives of business associations and representatives of ministries and the distribution of questionnaires to businesses to assess the level of implementation of NBA solutions; and examining government action plans, and legislative changes. Producing annual reports holds the government accountable for the pace and quality of reforms in Moldova. This is one way to reduce the implementation gap and strengthen enforcement. For more information: http://www.cipe.org/publications/detail/public-private-dialogue-moldova In the Phillipines, CIPE has supported the Institute for Solidarity in Asia (ISA) to implement the Performance Governance System for local governments across the Philippines. The Performance Governance System (PGS) is a rigorous accreditation program that requires participating organizations to reform and strengthen their governance practices with the goal of improving organizational performance, financial transparency, and political accountability. When a city adopts the PGS, local officials work with a broad-based community group to design specific public policy goals, an action plan to accomplish them, and performance metrics by which to measure progress. The Performance Governance System requires a city to implement a series of reforms that fundamentally transform its policymaking processes and bureaucratic structures, and its staff must complete a rigorous training regimen. Results from CIPE’s partnership with ISA have been outstanding. Cities have reduced poverty rates, increased the size of their middle class, and invested more money in education and housing. In Russia beginning in 2009, the Saratov Chamber of Commerce and Industry developed an approach to measuring the degree to which laws on the books were being implemented. The regional application of the approach was designed to capture a common problem in Russia – the disconnect between often well written laws and their enforcement by mid- and low-level officials. To give their findings a practical application, the Saratov CCI concluded an agreement with the regional Ministry of Justice and Prosecutor’s Office under which the two government bodies would work together to find remedies through better implementation. Their joint work led to legislative reform in the areas of taxation, business activity regulation and state agencies competing jurisdictions. The Saratov approach and results were posted on the SME Policy Advocacy project’s website, REACT, which serves as a clearinghouse of partner information. Eventually, under the Saratov CCI’s new approach, nine other regions adopted the same methods, first identifying implementation problems and then advocating for their resolution, sometimes in cooperation with local government bodies and sometimes not. In May of 2011, Russian President Dmitry Medvedev signed a decree calling for “Monitoring of Legal Implementation.” That summer, the government published instructions on how to implement the order. For more information on the Saratov methodology, see http://www.cipe.org/sites/default/files/publication-docs/saratovMethodologyEng2.pdf

http://www.cipe.org/sites/default/files/publication-docs/GI%20CIPE_Implementation%20Gap_for%20web.pdf

http://www.cipe.org/publications/detail/public-private-dialogue-moldova


http://www.cipe.org/sites/default/files/publication-docs/saratovMethodologyEng2.pdf

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II. Corruption: Variations of complaints about corruption manifest in each sector discussed above. Unfair approval and contract awarding processes, including the extortion of bidders and contractors, are chief among these, as are corrupt border practices that allow unauthorized goods to flood the Iraqi market. The system in general lacks checks and balances or a culture of transparency. Moreover, the confused legal and regulatory environment creates opportunities for exploitation.

Recommendation: Advocate for increased transparency and monitoring oversight in each sector and throughout the entire country Recommendation: Raise public awareness of the negative economic repercussions to paying bribes and tolerating corruption. Promote private whistleblower programs and anonymous reporting of corruption. Recommendation: Simplify the regulatory environment and provide clear direction from central authorities regarding expectations for enforcement. Streamline processes to remove opportunities for corrupt practices. Recommendation: Enhance governance and electronic governance practices among both governmental and private entities

Mechanisms: When businesses are interested in reducing corruption, they can be mobilized to take concrete steps against it. Collective action is a strategic approach to mobilizing the business community in order to fight corruption. Collective action reduces the incentives and opportunities for corruption. Collective action is a coordinated, sustained process of cooperation among private firms and other stakeholders. In the fight against corruption, a coalition of companies united by a set of principles and standards can have a far greater aggregate impact than individual people or companies acting alone. Tools include developing a transparency pact and an integrity pact in the short term and instituting a principle-based initiative, which later translates to a multi-stakeholder coalition. For more information on this process, reference the toolkit on Approaches to Collective Action. http://www.cipe.org/sites/default/files/publication-docs/FS_09-10-2013_JMKB_Collective%20Action.pdf

Collective Action Lessons Learned: o Private sector collective action cannot be a government-led or donor-led initiative. To achieve local buy-

in, it must a local effort. o Private sector collective action against corruption involves much more than integrity pacts. These efforts

must include a plan and roadmap that is in place at the outset of the collective action effort, including the key elements of the effort, before steps are taken to recruit members to the coalition.

o Standards and anti-corruption requirements should be specific and measurable, so that companies and government agencies understand their commitments and compliance can be verified.

o Generating positive media coverage of the collective action effort provides a strong incentive for companies to join the coalition.

http://www.cipe.org/sites/default/files/publication-docs/FS_09-10-2013_JMKB_Collective%20Action.pdf




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Case Studies: Collective Action against Corruption Experiences

Collective Action in Thailand – Since 2010, under the guidance of CIPE, the Thai Institute of Directors (IOD) has built a coalition of Thailand’s largest businesses and most influential business associations united in their commitment to tackle the supply side of corruption. Coalition members all signed the Collective Action against Corruption Declaration and pledged to take tangible, measurable steps to proactively reduce corruption-related risks. These steps included implementing anti-corruption policies and compliance programs, providing guidance on business conduct to managers and employees, and disclosing internal policies and experiences to help disseminate and promote best practices. Every company submits to an external evaluation that verifies whether it is meeting its commitments. The IOD estimates that member companies now represent nearly 20 percent of the Thai economy and more than one million employees. By establishing uniform standards of conduct and sharing anti-corruption experiences and practices, this campaign is leveling the playing field for business and increasing transparency and accountability in Thailand. Whereas this initiative targeted corruption within the private sector only, the same mechanism can be applied to corruption in government agencies. http://www.cipe.org/publications/detail/collective-action-against-corruption-%E2%80%93-thai-institute-directors

Collective Action in Bulgaria – The Center for the Study of Democracy (CSD), a Bulgarian public policy institute, looked to curb corruption through initiatives in certain key areas. CSD worked to promote corporate governance, engaged private businesses in anti-corruption efforts, and advocated for institutional reform in the privatization process. CSD partnered with the CIPE in policy advocacy and public-private partnership initiatives since the early 1990s, including the development of a pilot anti-corruption campaign. The success of those initiatives prepared CSD to lead the establishment of an anti-corruption group, Coalition 2000. In 1997, CIPE provided CSD with the seed money to establish this coalition, which aimed to create a cooperative platform of public and private interests. This all-inclusive platform combined the input and efforts of various stakeholders irrespective of their political or institutional affiliation. http://www.cipe.org/publications/detail/building-coalition-against-corruption

Collective Action in Russia – From 2002 to 2011, CIPE with the support of the U.S. Agency for International Development, implemented an “SME Policy Advocacy” project in Russia to lower barriers to business and reduce opportunities for corruption. Across 17 Russian regions, CIPE helped build advocacy coalitions of 225 chambers and associations, which counted as members 20,000 businesses and accounted for an estimated 2.2 million employees. As the coalitions identified local barriers to business, they recognized that corruption constituted the main barrier to business in Russia, in combination with administrative barriers, complex tax codes, limited access to information, and poor protection of property rights. The regional coalitions developed a four-step mechanism for collective action: 1. Share information openly and build consensus among coalition participants, in order to ensure that business speaks with one voice to government officials. 2. Create a common, unified defense against corruption and other barriers to business. 3. Prepare legislative analyses, from reviewing draft legislation to monitoring the implementation of existing laws and regulations. 4. Begin a dialogue between businesses and the government to advocate for needed changes. http://www.cipe.org/sites/default/files/publication-docs/FS_09-10-2013_JMKB_Collective%20Action.pdf

Collective Action in Armenia – CIPE’s partnership with Association for Foreign Investment and Cooperation (AFIC) established the Business Advocacy Network and strengthened the role of the private sector in Armenia’s economic policymaking. In order to advance private sector priorities, AFIC identified legal and institutional structures that propagated corrupt practices, developed recommendations for reform, and garnered broad support within the private sector to advocate for those reforms. The Business Advocacy Network provided a platform for impactful collective action by small and medium businesses to advance concrete policy changes, improve the business environment in Armenia, and eliminate opportunities for corruption. http://www.cipe.org/publications/detail/combating-corruption-through-collective-action-armenia

http://www.cipe.org/publications/detail/collective-action-against-corruption-%E2%80%93-thai-institute-directors

http://www.cipe.org/publications/detail/collective-action-against-corruption-%E2%80%93-thai-institute-directors

http://www.cipe.org/publications/detail/building-coalition-against-corruption


http://www.cipe.org/publications/detail/combating-corruption-through-collective-action-armenia

http://www.cipe.org/publications/detail/combating-corruption-through-collective-action-armenia

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III. Burdensome Bureaucracy: The unnecessarily cumbersome nature of routine administrative processes causes significant barriers and delays that lead to economic loss. In some cases, multiple levels of approvals are required before the private sector is allowed to develop or expand a business investment. In other cases, processes are simply unclear (for example, the Companies Law no. 21 in 1997), even to those mandating them, creating a significant deterrent to those looking to do business. Challenges were reported in relation to business registration processes, loan applications (see Law Number 94 from 2004), approvals and permits, policies in ports and harbors, as well as importing and exporting. In many cases, there were also reports of traditional non-electronic methods being used, highlighting the urgency of updating processes to include more efficient and transparent procedures.

Recommendation: In each sector, a review should be conducted of the most challenging and burdensome processes, and recommendations should be presented to the concerned parties on behalf of the relevant private sector organizations. Recommendation: As is the case with corruption, heavy bureaucratic burdens often result from uninformed local personnel. Updated trainings and manuals should be furnished to technocrats responsible for the enforcement of these procedures.

Mechanisms: Reducing the administrative burden for businesses is one of the best ways to foster a better business environment and grow the economy. One mechanism for doing so is to establish one-stop shop for the issuance of permits, registrations, collection of tax payments and duties. The one-stop shop mechanism usually minimizes the length of time that is necessary for handling administrative matters, reduces corruption and promotes transparency.

Case Study: Reducing Bureaucracy

In Moldova, the government lessened the administrative burden for business by establishing a one stop shop for receiving tax reports and providing taxpayer services. Improvements also include electronic filing of tax returns. Export procedures have also been simplified through introducing a one-stop shop for export operations, and establishment of customs clearance procedures for qualified businesses, reducing the number of physical document controls as well as the overall transit time. The government also recognizes the validity of international certifications issued by neighboring countries. http://www.cipe.org/publications/detail/public-private-dialogue-moldova


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IV. Lack of Strategic Planning: Without a strategic planning framework, it is difficult to address the issues identified in the Provincial Business Agendas. For example, ameliorating the knowledge or skill deficits related to modern technologies and practices requires a long-term holistic approach rather than piecemeal trainings to current practitioners. It is critical that any reform systematically addresses broad issues with regards to infrastructure, legislation, and technical deficiencies.

Recommendation: Redouble efforts to raise awareness and interest on the PBAs from the government at local and national levels. Recommendation: Private sector organizations (business associations etc.) within each sector should work within their sectors to develop long-term plans that take into consideration multiple issues in a strategic and integrated manner. Recommendation: Ensure that training needs and technical know-how are considered alongside infrastructure and other factors in the development of such plan.

V. Weak infrastructure: In rare cases there have been infrastructure developments and enhancements, but in many cases, infrastructure has actually deteriorated in recent years. Damaged and unpaved roadways and bridges create major delays, and the lack of reliable utility infrastructure, especially electricity, means that many businesses and industries are reliant on generators and therefore subject to unreliable fuel prices. In addition, the lack of industry-specific infrastructure, such as storage and processing facilities for agriculture, pose problems in those sectors. There is a clear need for improved infrastructure in order to support private sector development.

Recommendation: Draw together industry expertise and work with local government to identify and address infrastructure needs on a priority basis, in order to spur economic development in key areas. Recommendation: Ensure that contract awards are made free of corruption, to guarantee quality and efficient use of resources.

Case Study: Addressing Weak Infrastructure

In Afghanistan, the absence of reliable water and electricity is a major impediment to doing business. Industrial parks lack basic infrastructure, such as paved roads, running water, power, sewage systems, and health facilities. In accordance with the National Business Recommendations created by the Afghan private sector, the government has improved electricity supply and other necessary infrastructure at six existing industrial parks. The government is spending $17 million on the development of an industrial park in Nangarhar province and another $6 million was allocated for the construction of industrial parks in Logar and Maidan Wardak provinces. To improve security, the government has also allocated $1 million for the construction of protection walls around the industrial parks in five provinces. To increase the supply of reliable and affordable electricity, the Ministry of Power and Water decreased the price of electricity for industrial parks from nine to six Afghanis per kilowatt-hour. http://www.cipe.org/publications/detail/giving-private-sector-afghanistan-voice-policymaking

http://www.cipe.org/publications/detail/giving-private-sector-afghanistan-voice-policymaking

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