18 Dec 2013
Overall Rank of 151
For the last few years World Bank is publishing its Doing Business report on laws rules, and taxes that regulate business around the globe. So far, Iraq has done poor performances as per those reports. Previously the country was regulated by the autocratic dictator Saddam Hussein. The socialist state-run economy of Iraq was not up to the mark to attract the investors within the country.
Later comes the saga of wars and sanctions within the country for a long time and after that new government was formed in Iraq. Though for the new government it was quite challenge to cope up with the completely demolished infrastructure within the country. In last few years, Iraq has showed some positive developments which are making the investors optimistic about the future of the country. However, several problems are still there. Despite that Iraq did slightly better in 2013 than 2012 according to the World Bank due to some less cumbersome rules for operating an enterprise.
In December 2013, World Bank has released “Doing Business 2014, Understanding Regulations for Small and Medium-Size Enterprises”. The latest issue included 189 countries, up from 183 in 2012. Each nation is ranked according to eleven areas that affect establishing and running a business.
The report has been published judging a lot of parameters and they are legal protections for the corporate, taxes, and security. In the latest report, Iraq managed to clinch the 151th spot in the ranking, showing improvements in comparison to the last year. In 2012, Iraq’s ranking was 176 and in 2011, the country was ranked at 164. That was due to the shortening of the time it took to complete key practices from the previous year. For example, Iraq went from 176 to 169 in starting a business because there was one less procedure to follow to complete that task. That led to a dramatic decrease in the time necessary to get through the regulations from 77 days in 2012 to just 29 in 2013. The number of procedures to get construction permits also went from 13 to 10 resulting in a drop from 187 to 139 days to get complete them.
For the other categories however Iraq did the same. Its rank for getting electricity improved from 46 to 39, but the procedures, 5, and time, 47 days, did not change. Similarly registering property still took 5 procedures and 51 days. More troubling was the lack of credit and legal system for business.
Country’s credit rank has been decreased significantly from 174 (2012) to 180 (in the current report). Finally Iraq scored poorly on protecting investors, trade, enforcing contracts, and resolving insolvency. For example, it took over 80 days to import or export goods, 520 days to enforce a contract, and there were no procedures for insolvent businesses.
Like many developing countries Iraq largely relied upon the state to lead its development. That increased under the Baathist regime, which had a socialist ideology. Baghdad now says that it is diversifying its economy, and developing the private sector, but that’s mostly in words with little action being taken.
Many of the country’s politicians do not understand economics either, and think short-term about their own political benefit, which undermines proper planning and legislation. This is one of the biggest drawbacks for Iraq’s business environment. That was the reason why Iraq was only one of seven countries in 2013 that did not carry out any reforms in the areas that the World Bank monitors.
Iraq’s 2013 Rankings On World Bank Doing Business Report
Overall Rank 151
Starting a business rank 169
Number of procedures 10
Time to complete 29 days
Dealing with construction permits
Number of procedures 10
Time to complete 138 days
Getting electricity rank 39
Time to complete 47 days
Registration of property rank 108
Time to complete 51 days
Getting credit rank 180
Strength of legal rights index 3 out of 10
Depth of credit information 0 out of 10
Public registry coverage 0
Private bureau coverage 0
Protecting investors rank 128
Extent of disclosure index 4 out of 10
Extent of director liability index 5 out of 10
Ease of shareholder suits index 4 out of 10
Strength of investor protection index 4.3 out of 10
Paying taxes rank 63
Payments 13 per year
Time to complete 312 hours per year
Trading across borders rank 179
Documents to export 10
Time to export 80 days
Cost to export per container $3,550
Documents to import 10
Time to import 82
Cost to import per container $3,650
Enforcing contracts rank 142
Time to complete 520 days
Resolving insolvency rank 189
Time to complete No practice
Cost No practice
Recovery rate 0
Iraq looks to be slowly improving its business regulations, but the pace is not as fast as it could be. The country needs massive rebuilding and has huge untapped potential. The lack of business knowledge, and the fact that almost all of Iraq’s elite grew up in state-run economies is hampering the process of reform that would speed up development. Still some progress is being made as the World Bank report showed. Only through cutting back on the massive red tape can the country hope to begin to emerge from the years of wars and sanctions that have set it back so much.