Business Challenges in Kurdistan and Corruption
Kurdistan has a broad variety of businesses flourishing in the cities of Sulaimny, Hawler, and Duhok, and their number’s increasing every year by a fair rate. Although it might be surprising that the ease of doing business in these cities are not much different than what it was a decade ago. Kurdistan like any other region in the Middle East is not excluded from having big businesses practicing monopoly, and monopoly market structure happens to be with accordance to some fort of corruption in Kurdistan. This doesn’t allow businesses owned by an average citizen to flourish in the market. This makes the wealth of the population to be with a very small percentage of the population. Iraq like Saudi Arabia has most of its revenue from selling and exporting oil, and Kurdistan is no exception. Considering that most of the region’s income relies on oil, it is more likely that the entities and individuals that are getting their wealth from either government positions or their contracts with oil companies are the elites as business owners that can easily affect the region’s economy.
A clearer expression of that would be whatever businesses these groups of people practice, they can make it into a monopoly that serves them in the long run. The current regulations in Iraq and especially Kurdistan do not allow a great percentage of the free market and if it does it is a rare chance that is available to very few people. This is not the only issue that’s with the way we do business in Kurdistan, regulations and participation is also very loose and not existed that can easily make way for the facilitators of corruption to enter the region, and especially businesses. Monopoly, corruption and regulations that serve them are the obstacles for establishing free market and making way for a more democratized Kurdistan that citizens do businesses as it serves them best.
According to an article published in one of the most viewed Kurdish website, the list of the most politically influential people in Kurdistan are as follows: Massoud Barzani, Nechirvan Barzani, Masrour Barzani, Ashty Hawrami, Hero Ibrahim Ahmed, Karim Sinjari, faruq Mala Mustafa, Hoshiar Zebari, Mala Bakhtiar, etr. These politically influential people each happen to be one of the richest business men and women in Kurdistan. It is not a secret that these politically influential people are also part of the upper class in the community, and their decisions and acts can affect KRG’s economy state.
If any of these elites enter a market they will build a firm or a business that practices can sustain much more in the market than a firm would owned by citizens. No regulations in Kurdistan can prohibit wealthy groups of people from simply practicing a business that serves them. It is more of what the KRG needs to have these business and many more business people like them. The argument here is that it is too hard for KRG people to join them in the competition. The corruption in Kurdistan seems clear to see when looking at the statistics of who are the wealthy individual and families and how politically influential they are. This paper doesn’t provide concrete evidence about the relations and connections of these people, but it simply shows how corruption made starting, building, sustaining, and improving giant businesses in Kurdistan difficult. According to Syndromes of corruption participation and strong institutions are what eliminates paths that can easily lead to corruption. In Kurdistan most of the big businesses directly or indirectly relate back to some entity or individual who has access to Kurdistan’s main revenue which is oil.
Infrastructure in Kurdistan for example is not excluded from the corruption that’s happening in the businesses. After Saddam’s collapse in 2003, Kurdistan had to be gone through major development in many sectors. One of those sectors was urban development. In the book of Syndromes of Corruption it talks about how urban development can be a way of measuring corruption. It could also be an indicator for the ease of making actions and decisions that make way for corruption inside and outside of the legal system. In Sulaimany there are a few major companies that build housing and apartments and have been widely known across the region. A few of those are Pak City, Rozh City, Darwaza City, Goizha City, etc. These private companies has made contracts with the government’s urban planning department to get land from them and build units of theses houses with a cheaper price.
The government’s aim in this as it is stated in their website, is clearly with the doing better with this sector, “While public infrastructure is suffering from chronic underinvestment, the regional government has approved more than $4 billion worth of mostly private development projects since 2006. Many of these projects include provisions for commercial facilities as part of their master plans. Turkish companies alone have won over $653 million in contracts for institutional and commercial construction projects.” (RTII) This means that major projects worth billions of dollars have been approved to be build in order to help urban developing to flourish.
According to the government’s and more specifically Department of Infrastructure’s reports the programs and projects that serve Urban development must have a certain quality and at least cover up for most of the housing issues facing the region. “Our program for improving infrastructure includes a coordinated set of policies that will elevate the quantity and quality of infrastructure in the Kurdistan Region. Our government knows that people can achieve their full potential only if they have the physical infrastructure to support their efforts. We also know that if we want to provide this infrastructure efficiently for the benefit of all the people, we must price the infrastructure correctly and involve the private sector.”
The government states specifically that the infrastructure must benefit all of the people. This mean it should mainly help the average working people and the lower, but according to an article published on BBC news in 2013, “Average monthly wage rose from $300 (£198) to $1,100 over past decade.” (Maher)
In the same report of the Department of Planning and Infrastructure, it is estimated how costly the units of these so called urban development projects costs. They stated, “One development, Dream City (“the most elegant square kilometer in Iraq”), will include about 1,200 houses with prices between $180,000 and $700,000, as well as three schools, a supermarket, a restaurant, recreation areas, a casino, and a mosque. Several luxury hotels are under construction, including one by the hotel chain Kempinski.” (RTII)
The numbers in this particular example are clear that an average working person cannot by any means effort a unit of the houses that a business like Dream City has provided. This happens when the government makes way easy for businesses to offer the best price for all of the people to benefit. The example shows how effective the regulations that government has set for these companies are. The more companies get away with these high purchase prices, the more businesses get into urban development sector.
Another construction business that has been constructing in Hawler has their prices as it is stated in an article by Dashti Kareem in a Kurdish website, that supports the argument that housing in Kurdistan are very pricy for an average working person, “A house in the Italian Village ranges in price from US$300,000 to US$500,000. In Vital Village prices go from US$400,000 to US$500,000 and in the even pricier Karin Land, prices start at US$600,000 and can go up to US$1 million. Meanwhile the Kurdish Globe reports that the average salary for anyone employed in the public sector works out at between US$ 400 and US$ 500, which makes home ownership a distant dream for many locals.” (Kareem)
This report also talks about the people that moved to the KRG prior to 2015 crises and it estimates their number as follows, “Growth of the construction sector in the Kurdistan Region has been robust over the past four years due to strong economic growth and the demand for housing magnified by the migration of thousands of Arab Iraqi professionals and their families to the Kurdistan Region. Since 2003, it is estimated that 15,000 families have moved to Erbil and 38,000 families have moved to Sulaymaniyah from other provinces in Iraq.39 Assuming an average of four people per family, the population growth due to migration since 2003 has been 4.5% in Erbil and 9.4 % in Sulaymaniyah. As a result, there is an immediate need for housing, schools, hospitals, and other infrastructure in the Region, which will require at least $5 billion to build.” (RTII) The date of the report goes back to pre-ISIS crises that led to tens and thousands of Arabs to move from their cities to all of the three cities in the KRG.
A counter argument would suggest that construction in the KRG is also expensive and the unstable prices of the materials and equipment used in the constructions change. It is also mentioned in the report, “As in most parts of the world, building costs have been rising significantly in the Kurdistan Region as a result of rising prices for fuel, labor, and materials. For example, since 2000 cement prices have increased from $25 per long tonne to $125–$150 per long tonne, regardless of origin, and rebar steel has increased from $200 per tonne to $700–$800 per tonne. The Kurdistan Contractors’ Union states that institutional construction costs have increased 5%–600% over the last 10 years.” (RTII)
In order for the government to help making housing and urban development affordable and beneficial to all of the people, it also needs some strong regulations to be applied to the trading of construction goods before accepting huge projects like Dream City and Italian City to be constructed. These and many other issues go back to the many plans that are not being implemented correctly. The objectives of ministry of planning according an article written by Kurdish National Assembly are as follows:
• Improving land-use regulations
• Encouraging development of mixed-income neighborhoods
• Reforming land titling and ownership
• Establishing a housing-finance system.
The Even though the government has promised these points and objectives, in reality the rules are not being applied, the regulations aren’t effective, the statistics stand against these objectives, and few to non existence of these land use regulations has been applied. In conclusion, the businesses in the KRG face so many challenges because of the obstacles that’s been put infant of them by the major wealthy entities and huge rate of corruption that’s been put forward in only one sector that the KRG has.
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