Kurdistan can emerge from depression
It is manifest that Kurdistan is facing a deep economic crisis—one of the worst economic conditions any society can experience. We are facing mass unemployment, layoffs, falling wages, declining Gross Domestic Products (GDP), and the drying up of liquidity.
GDP in Kurdistan has drastically fallen, which indicates that the Region’s overall output of goods and services at market prices is exceedingly low. The banks' liquidity has reached the bottom and needs a massive injection of capital to make loans and they generally do not offer investment opportunities, largely due to lack of a comprehensive financial system. The overwhelming majority of banks continuously deal with paying late salaries. Most employees in Kurdistan have not been paid their salaries for several months.
There are many variables exacerbating the economic crisis: the war against the so-called Islamic State, the influx of nearly two million refugees and Internally Displaced Persons (IDPs), Baghdad’s economic embargo against Kurdistan Regional Government (KRG), the drastic drop in oil prices, and the neighboring Syrian civil war all put addition strain upon resources.
The question is: what should Kurdistan do to emerge from the depression it is currently experiencing?
The measures that developed countries took when facing the global recession in 2008 underline that there is a significant difference between that economic crisis and the one facing Kurdistan. The main reason for the recession in developed countries was the credit crunch. These countries emerged from their recession by undertaking austerity measures and implementing a systematic approach towards resolving the crisis.
However, the problem in Kurdistan needs a solution that is congruent with its socio-political environment.
To stimulate the economy and rapidly increase employment the government should focus on borrowing money from international financial institutions. The majority of these loans could go toward infrastructure-related projects. Simultaneously, sizable budget cuts are necessary, and the employment rate must be optimized.
The government needs to design a long-term strategy to transfer the vast majority of its employees over to the private sector. This strategy cannot materialize without the government investing in domestic agricultural and industrial projects in tandem with the private sectors.
One of the conditions to enter into such an arrangement must be that the private sector hires governmental employees. However, most employees may not be willing to transfer to the private sector that absents a system of pensions and social benefits. To placate concerns, the government must initiate a comprehensive plan approbated by parliament. A law can be passed to incentivize and encourage the private sector to participate in such agreements.
Once the employment burden is alleviated, the Ministry of Planning should develop a long-term strategic plan to implement E-government programs. The benefits of E-government programs include transparency and effective interactions between the government and citizens. However, such programs require competent employees. Hence, governmental employees should undergo mandatory training courses to improve their skills in the public sector.
Additionally, the government should put a hold on granting licenses to new universities. Instead, it should encourage establishing more vocational colleges to deliver skilled workers to the marketplace. Moreover, Kurdistan is blessed with abundant natural scenery, which allows it to develop lucrative projects in the Tourism sector.
Equally important, the government should promote healthcare and social welfare. Health insurance can be provided at a reasonable cost, or the government could initiate a National Health System ratified and supported by parliament which would offer free healthcare services to citizens. However, this option would require establishing a system of taxation as a financial source for the system.
Moreover, the Ministry of Planning should develop a ten-year plan focused on regulating and implementing a sustainability strategy focused on renewable energy. This plan will help to preserve Kurdistan's environment and will reduce the enormous costs required to create a self-sustained economy.
Banks could play a crucial role in elevating the economy by being more involved in investment projects. Steps should be taken to modernize the banking system and to build trust between banks and the citizens of Kurdistan.
Despite the fact that Kurdistan is enduring an economic depression, it is highly unlikely that the economy will go entirely flat. Nations like Greece and Spain have plunged into severe debt due to economic recession but are still running.
It will take patience and hand-in-hand cooperation to come up with a solid solution. Blessed with abundant natural resources, particularly natural gas, and with a potential capacity to grow in multiple sectors, Kurdistan could have a bright future.
Dr. Honar Issa is a member of the Board of Trustees at the American University of Kurdistan – Duhok (AUKD)
The views expressed in this article are those of the author and do not necessarily reflect the position of Kurdistan24.