Private sector fails to flourish in Iraq, 'Iraqi citizens were desperate for the money.'

[DogPoundPup]

By Campbell Robertson
Published: August 11, 2008


BAGHDAD: Hampered by years of violence, a devastated infrastructure, a lack of foreign investors and a flood of imports that undercut local businesses, the Iraqi private sector, particularly its small non-oil economy, has so far failed to flourish as its American patrons had hoped.

In its absence, the Iraqi government has been sustaining the economy the way it always has: by putting citizens on its payroll.

Since 2005, according to federal budgets, the number of government employees has nearly doubled, to 2.3 million from 1.2 million.

The impetus is not only economic: In exchange for abandoning the insurgency that plunged the nation into civil war, many of the 100,000 members of civilian patrols known broadly as the Awakening movement have been promised jobs in the security forces or in reconstruction, though many Sunni Muslim members complain it is not happening quickly enough.

But this growth has not come without problems. Already, a huge wage increase to government workers that was instituted - but then suspended because of fears that it was pushing up inflation - has underscored the difficulties of being far and away the largest employer in an unstable country.

In 2006, 31 percent of the Iraqi labor force was working in the public sector, according to the agency for statistics in the Ministry of Planning. The agency expects that figure to reach 35 percent this year, about 5 percentage points short of where the CIA estimated it to be on the eve of the 2003 invasion.

This figure is not atypical for the region, but it hardly indicates the free market state initially envisioned by the U.S.-led Coalition Provisional Authority, which pushed for full and rapid privatization in its first few months.

"For all the talk about the private sector taking off in Iraq, it didn't materialize," said Haider al-Abbadi, who is on the parliamentary economic committee, and is disappointed by Iraq's reversion to its old statist habits. "People would say, 'Well, these people are poor; we need to help them.' It's true, but we didn't create jobs. I think this is a huge problem."
http://www.iht.com/articles/2008/08/11/mideast/baghdad.php