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IRAQ: INVESTMENT CLIMATE 2012 ASSESSMENT INVESTMENT IRAQ: IRAQ Investment Climate Assessment 2012 IRAQ

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IRAQ: INVESTMENT CLIMATE 2012 ASSESSMENT INVESTMENT IRAQ: IRAQ Investment Climate Assessment 2012 IRAQ Public Disclosure Authorized IRAQ: INVESTMENT ASSESSMENT 2012 CLIMATE IRAQ Investment Climate Assessment 2012 IRAQ Investment Climate Public Disclosure Authorized Assessment 2012 Public Disclosure Authorized Public Disclosure Authorized 1221366 IRAQ Investment Climate Assessment 2012 Inger Andersen, Vice President Loïc Chiquier, Sector Director Hedi Larbi, Country Director Simon C. Bell, Sector Manager Hooman Dabidian, Task Team Leader Iraq Investment FM 10-16-12.indd 1 10/17/12 3:42 PM Iraq Investment FM 10-16-12.indd 2 10/17/12 3:42 PM iii CONTENTS Abbreviations and Acronyms.......................................................................................................vii Foreword ......................................................................................................................................ix Acknowledgements ......................................................................................................................xi Executive Summary ....................................................................................................................xiii INTRODUCTION .................................................................................................... 1 MAIN IMPEDIMENTS TO PRODUCTIVITY .............................................................. 7 REFORM STATE-OWNED ENTERPRISES .............................................................. 25 STRENGTHEN MARKET GOVERNANCE .............................................................. 37 Corruption....................................................................................................................38 Informality ....................................................................................................................46 Security and Crime .......................................................................................................48 IMPROVE INFRASTRUCTURE AND TRADE .......................................................... 51 Power Supply ...............................................................................................................52 Water Supply ...............................................................................................................55 Transport and Trade .....................................................................................................56 ENHANCE ACCESS TO FINANCE, LABOR AND LAND ....................................... 59 Land .............................................................................................................................60 Labor and Gender ........................................................................................................65 Access to Finance .........................................................................................................73 LOOKING AHEAD: STRATEGY FOR REFORM ...................................................... 85 ANNEX I: Iraq at a Glance ........................................................................................................... 91 ANNEX II: Doing Business Reforms .......................................................................................... 101 ANNEX III: Gap Analysis Methodology ..................................................................................... 109 ANNEX IV: Productivity and Investment Climate Conditions .................................................... 111 ANNEX V: Survey Methodology ................................................................................................ 115 ANNEX VI: Focus Group Discussion ......................................................................................... 119 ANNEX VII: Summary of “Road Map” for SOE Reform ............................................................ 123 REFERENCES ............................................................................................................................127 Iraq Investment FM 10-16-12.indd 3 10/17/12 3:42 PM iv IRAQ | INVESTMENT CLIMATE ASSESSMENT Figures Figure 1: Overview of Iraq, 1955–2012 ......................................................................................xiii Figure 2: Timeline of Conflict in Iraq, 1958–2012 ........................................................................ 2 Figure 3: Regime Changes in Iraq, 1958–2012 ............................................................................ 2 Figure 4: Constraints to Enterprises in Iraq .................................................................................. 9 Figure 5: Constraints to Firms in Iraq, by Size ............................................................................ 10 Figure 6: Constraints to Enterprises in Iraq, by Region .............................................................. 11 Figure 7: Losses due to Investment Climate Weaknesses in Iraq and Comparators .................. 12 Figure 8: Investment Climate Losses Vary Widely by Firm Characteristic and Location ............ 13 Figure 9: Productivity Gap Analysis: Iraq and Comparators ....................................................... 13 Figure 10: TFP of Firms in Food & Processing Sector: Iraq and Comparators ........................... 14 Figure 11: TFP of Firms in Textiles & Garments Sector: Iraq and Comparators ......................... 15 Figure 12: TFP of Firms in Electronics Sector: Iraq and Comparators ........................................ 16 Figure 13: TFP of Firms in Chemical, Pharmaceuticals, and Non-metal Sector: Iraq and Comparators ............................................................................................................. 16 Figure 14: TFP of Firms in Metals and Equipment Sector: Iraq and Comparators ..................... 17 Figure 15: Textiles and Garments Sector: Unit Labor Cost by Country ...................................... 18 Figure 16: Electronics Sector: Unit Labor Cost by Country ........................................................ 18 Figure 17: Iraq – Labor Productivity and Unit Labor Cost by Firm Size ...................................... 19 Figure 18: Iraq: Labor Productivity and Unit Labor Cost by Sector ............................................ 19 Figure 19: Annual Budget Subsidies for Iraq’s SOEs .................................................................. 27 Figure 20: Average Import/Export Cost, Per Container (US$).................................................... 29 Figure 21: Worldwide Governance Indicators for Iraq and MENA Region ................................ 39 Figure 22: Informal Payments to Public Officials ........................................................................ 39 Figure 23: Inspections and Informal Payments .......................................................................... 40 Figure 24: Number of Inspections .............................................................................................. 40 Figure 25: Time to Obtain Connections and Incidence of Gifts ................................................. 41 Figure 26: Frequency and Value of Informal Payments .............................................................. 42 Figure 27: Are Courts Fair, Impartial, Uncorrupt (% Agreeing) ................................................... 43 Figure 28: Interpretations of Regulations Consistent, Predictable (% Disagreeing) ................... 43 Figure 29: Practices of Competitors in the Informal Sector ....................................................... 47 Figure 30: Non Reporting of Revenues in Iraq and Comparators .............................................. 47 Figure 31: Experience of Security Costs, Iraqi Firms .................................................................. 49 Iraq Investment FM 10-16-12.indd 4 10/17/12 3:42 PM CONTENTS v Figure 32: Power Supply Indicators ............................................................................................ 53 Figure 33: Electricity from Own Generator (%) ........................................................................... 54 Figure 34: Sources of Water, by Location ................................................................................... 55 Figure 35: Import and Export Clearance Time ........................................................................... 57 Figure 36: Access to Land, Regional Variation ........................................................................... 62 Figure 37: Access to Land .......................................................................................................... 63 Figure 38: Land Ownership ........................................................................................................ 63 Figure 39: Land Ownership in Iraq ............................................................................................. 64 Figure 40: Firm Perceptions of Labor Market Constraints to the Investment Climate ............... 65 Figure 41: Average Education Attainment of Workers in Iraq .................................................... 66 Figure 42: Provision of Training to Workers (in Percent of All Firms) .......................................... 67 Figure 43: Household Socioeconomic Survey ............................................................................ 69 Figure 44: Women are Very Unlikely to be Formal Enterprise Owners in Iraq ........................... 70 Figure 45: Women are Very Unlikely to be Senior Managers in Iraq .......................................... 71 Figure 46: Women are Very Unlikely to Have Formal Private Sector Employment in Iraq ......... 71
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