FALLUJAH, Iraq -- Imad Talib al-Obeidi ticks off 18 places he had
to visit to start his bottled water plant: the police, the environment
directorate, the health directorate, the city council and the district council, for
He's one of the relatively
few Iraqi businessmen stubborn enough to play by the rules.
Iraq is the country of
bribes," al-Obeidi said. "Our main problem is the hostile attitude by government
employees in the offices because they show no cooperation, and if you do not pay
bribes they will put obstacles in your way."
The U.S.-led invasion eight
years ago provided an opportunity to liberate Iraqis not only from Saddam
Hussein's oppression, but also from a command-and-control economy dependent on
oil revenues. But when the last U.S. troops withdraw from Iraq by the end of the
year, they will leave behind a nation in which widespread corruption,
bureaucratic hurdles and electricity shortages continue to stifle the
2010 World Bank report listed Iraq as 174th out of 183 countries when it came to
the ease of starting a business. Transparency International, which monitors perceptions
of corruption, ranked Iraq 175 out of 178 countries in 2010; only Afghanistan, Myanmar and Somalia fared worse.
Oil revenues make up
roughly 95 percent of Iraq's budget, and the economic focus since the fall of
Saddam has been on boosting the oil output and enticing foreign investors to
exploit the oil fields. But graft and red tape remain challenges for them too:
Even supposedly easy tasks, such as obtaining a visa, are difficult.
Nevertheless, experts say
small business development can provide more jobs than big oil projects can. And
by making their own goods, small businesses help a country become more
competitive, self-sufficient and entrepreneurial -- rather than relying on
imports. These intangible qualities may far outlast the country's oil
"There is an absolute need
for a country's businesses to become competitive," said Abdulwahab Alkebsi, from
the Washington-based Center for International Private Enterprise. "That's the
area that can improve the quality of life for Iraqis."
Prime Minister Nouri
al-Maliki's spokesman, Ali al-Moussawi, said the government is trying to
minimize bureaucracy and fight corruption but that such reforms take time to
implement. He said the government approved a law two years ago that was designed
to encourage foreign investment and has also been giving loans to people in the
Small and medium
enterprises make up only about 6 to 8 percent of Iraq's gross domestic product,
estimates Sherwan Anwar Mustafa, managing director for the USAID-funded Iraqi
Company for Financing SME's.
In the U.S. by contrast,
small businesses employ about half of all American workers and make up more than
half of the non-farm gross domestic product, according to the federal
government's Small Business Administration.
Al-Obeidi said he once spent two months going from
office to office in the Anbar Province Environment Directorate to get a piece
of paper saying that his plant in the city of Fallujah was for commercial and
not residential use.
He even had to convince the police and Mukhabarat --
akin to the FBI -- that he wasn't going to poison anyone. They must
have been won over because he says some of his regular clients now are police
He said he could have
avoided the whole process with a $20 bribe, but stubbornness made him persist
through legal channels.
The difficulty in
registering means many Iraqi business owners instead operate off the books. A
recent survey by the Center for International Private Enterprise of 900
businesses across Iraq found that 55 percent were unregistered. That means they
don't pay taxes and aren't necessarily following the most stringent of
In Fallujah, Suhaib Munim
owns a small yogurt factory that operates without a license.
"We gave someone a $1,000
bribe to obtain these permissions in a faster way and to ignore the faults in
the health measures in the place. My place lacks health measures such as ceramic
tiles which should be covering the walls and the floor, but this would cost me a
huge amount of money," acknowledged Munim.
When it's hot, Munim and
his employees lounge barefoot in the refrigerator unit alongside the cooling
yogurt -- a likely violation of health regulations.
He said if the Anbar
province health officials knew where his office was located, they would close
him down. But like many business owners used to Iraq's lax regulation
enforcement, he had no hesitancy in talking to a foreign journalist.
Now that he'd like to
expand, he's running into a typical problem for unregistered businesses. It's
hard to get a bank loan to buy property. It's also difficult to acquire property
from the government, the biggest landowner the country, in which to build a new
Alkebsi said often the
emphasis is on shutting down such businesses instead of helping them become
The deputy governor of
Anbar province downplayed the registration problem and said it should take only
a week to 10 days to get the necessary approvals to open a business. He said it
is Iraqi citizens who are encouraging corruption by offering to pay the
Al-Obeidi, who employs 30
workers, said he may close his bottled water plant in two years if the economic
situation in Fallujah doesn't improve. He might then run into another
About the only thing harder
than opening a business in Iraq appears to be closing one. Business owners who
go under have to prove they've paid all their taxes, legal fees, workers'
paychecks and debts.
Read more: http://www.foxnews.com/world/2011/10/18/red-tape-corruption-stifle-iraqs-economy/#ixzz1bA111pou
Red Tape, Corruption Stifle Iraq's Economy - Source