KRG Relation between State, Market and Society
This paper examines the relationship between the Kurdistan Regional Government (KRG), the market, and society within the Kurdistan Region of Iraq. It explores the KRG's economic policies and political agendas since its establishment, highlighting the evolution of its governance and economic strategies. Despite the relative newness of the KRG, it identifies the region as having a mixed economy with both free market and social characteristics. The paper emphasizes the need for clear, long-term economic planning to ensure sustainability and prosperity amid existing uncertainties.
Introduction
Kurdistan Regional Government (KRG) is relatively a new government since it was only established two decades ago (Brief History of The KRG, 2014). Therefore, its public policies and political agendas might not be very clear yet to confidently determine its type of government and what kind of relation KRG has with market and society in Kurdistan Region of Iraq (KRI). However, this paper will try to shed light on the relation among the three. By that the nature of KRG government will be clearer regarding market and society. This paper will also try to provide possible solutions to enhance the system and work on weakness points in the relation between the three. In this paper we will ask some questions, like what is the system that KRG is following when it comes to market and economy in the region? How much intervention does KRG has in the market? How was this system chosen and decided for the region? Does this system fit the society needs and demands? Is this the best system KRG can apply to? How can it be better and be updated to the changing societal needs? What are the limitations and short comings of the system? As well as other questions that may be asked.
Kurdistan Region Background
KRG was established and created in 1992 after the US-led no-fly zone which was made to protect Kurdistan Region from Saddam regime. The KRI democratically elected the first parliament at that time and from that time especially after 2003 KRG has made and developed sets of rules, laws and regulations. In 2006 after the unification of two KRG cabinets and making the 5th cabinet, led by Nechirvan Barzani, there were a number of unprecedented policies and regulations that were not possible to pass previously. Such as working on oil and gas policy, reconstructing the infrastructure, having better foreign relation, including more funding and encouragement for social and economic projects and working on promoting investment, local and foreign, and facilitating it. While the 6th cabinet, which was led by Barham Salih, focused more on domestic social matters such as housing, education, provision of electricity and drinking water, better healthcare system and KRG transparency. While 7th cabinet worked on oil and gas production and foreign investment. (Brief History of The KRG, 2014)
Terms and Definitions
To start with I will try to define some terms first. Politics however, is seeking and exercising power and authority over a society to rule a country though a government (Heywood, 2007, pp. 4-6). That power might be gained by democratic which implies legitimacy or it might exist through dictatorial.
Political economy is the study of the interrelation and interaction between politics and economy and how they affect or influence each other (Drazen, 2000). It can also be described as the combination of both politics and economics; both systems are very intertwined with each other. Political decisions affect economic systems and economic actions also have huge influence over state policies. (Danziger, 2013)
Market is the system that possible exchange of goods and services occur, where sellers and buyers come into contact with each other. In most cases, money is used as a currency to exchange goods and services for. Markets usually are impersonal; the prices are set according to the power of ‘invisible hand’, which Adam Smith talked about, or more clearly set by supply and demand of the goods and services in the market, where profit is the motive behind the set price (Heywood, 2007, p. 185). Whereas economy is the system that goods and service are produced, distributed and exchanged. Mainly, there are two types of economic systems which are highly contrasted. Those two systems are so popular that they even shaped the political/economic spectrum. They are market economy, which may also be called capitalist economy, and command economy, also called planned economy which is associated to socialism (Heywood, 2007, p. 184). I will shortly mention principles and feature of both types of economies so it would be easier to categorize KRI’s type of economy and its relation with the state, KRG.
Most important principles of market economy are as follow. In market economy, the market is led by itself and there is a minimal state intervention, where the means of production, such as land, labor and capital are under private control (Danziger, 2013). Business owners are the decision makers who have direct control over their production and any decision regarding their business or products, goods and services. Prices are usually set by the market itself under the influence of balance of supply and demand. Competition between different businesses results in economic growth. State role lies to few rules and providing protection. (Danziger, 2013). Andrew Heywood mentions few features of capitalist economy in few points. He says commodity productions whether being goods or services are produced to be exchanged with money, which means it has a market value. Also says the main motivation for work and business ownership is maximizing profit for material self-interest (Heywood, 2007).
Principles of command economy can are very different from ones of market economy. Here the state is the owner of all means of production, land, labor and capital, and the state is in absolute control over anything related to production and distribution of goods and services. The state is the one responsible over the economy and its direction and is involved in all decisions even the material value of products and amount of producing goods. The state has maximum intervention over command economy. (Danziger, 2013) Another feature is that economy runs by cooperative effort of people where they have a sense of responsibility towards each other and pursuing a common good rather than being individualists and following material self-interest. Main difference between market economy and command economy is that the first aims to satisfy the desire of business owners while the latter focus on satisfying more basic human needs and few desires as explained by Heywood (2007, p. 184).
There is an economy system type which has some features and characteristics of both market economy and command economy, it is called mixed economy. It is a try to combine the good features of both economies and overcome the limitations and shortcomings that they have. It allows the existence of both private and public ownership under some rules and regulations, and also means of productions can be owned by either of them. State intervention exists and is more emphasized comparing to market economy. It has more rules, laws and regulations. It intervenes where the market fails, dealing with some problems that the market economy created such as inflation, high rates of unemployment and poverty rate. (Danziger, 2013)
KRG Policies and Regulations Overview
There is some good information that we can have from looking at the draft constitution of Kurdistan Region. Below, I will mention the most important ones.
· In article 15 it says “Kurdistan Region applies (legitimate) system of competitive market economy with encouraging and adopting economic growth on modern basis with also investment whether public or private and monopoly is not allowed unless there is a law for it” (2009). It clearly says it is using and applying a market economy with having rules and regulations for it and also hints public and private ownership.
· In article 17 the draft constitution says the government is responsible for providing free education in all its levels, from elementary school including higher education. Everyone has the right to have that education and it is compulsory to finish the basic levels of education, and also the government provides necessary training for those who need it.
· In 20th point of article 19 it mentions how every person has the right to have private ownership within boundaries of laws.
· In article 24 of the draft constitution it says that every person has the right to have health care and medical treatment regardless if they can afford it or not. And also every person has the right to have social security insurance in special cases, for example, maternity, sickness, unemployment, homelessness, and being an elder. It also mentions that according to economic basis the relation between employers and employees is regulated with respect to social justice rules.
· In article 27 in mentions that natural resources with all its types are public property and its exploitation and usage is regulated with laws. Also in second part of article 18 it says that a ‘corporate person’ has same rights as a ‘natural person’ if it applicable. This means that the state has the responsibility to protect the rights of companies and businesses.
· In article 28 it emphasizes on the government responsibility to protect consumer rights and have legal ways for them to be able to defend themselves, and that they can also start consumers’ rights unions and groups.
That shows the state in KRI is not only interventionist, by having many rules and regulations for running the market, but also there are many things under the responsibility of state government such as providing free education even including higher education and free healthcare. Those two points show a big contrast to other highly capitalist countries as even healthcare there is privatized. All that explains how the state is not really a capitalist state in terms everything should be privatized, but the state has many responsibilities and duties over its shoulder for its people.
At KRG official website many information can be found about KRG rules and regulations regarding company registration and investment in the region, welcoming and assisting trade and investment missions. It also provides information about Kurdistan Region Investment Law stating that it encourages and promotes foreign direct investment in the region. (Economy and Business, 2014) That is also noticeable in Investment Law of Kurdistan Region (2006). It indicates that any investment or economic business, local or foreign can be completely owned by the investor, natural or corporate investor, also, that investor may the land used of investment rented free of charge for a specified period of time, for the purpose of encouraging investment for the region, but that would be applied under set conditions. It also says that the state may reallocate any privately owned land if it was decided by KRG for reasons seen best for KRI. (Iraq, 2006)
Critical Analysis
According to all the above, it shows that Kurdistan Region does not seem to have a clear type of economy. It has features from both types of systems, command economy and market economy. By giving freedoms of having private property following the international world market based on competition motivated by profit, and also giving the basic fundamental freedoms of selling, buying, producing, employing including other fundamental freedoms of the free market, it also clearly shows by actions and words how it supports and promotes investment. All those are indicators of existence of free market. Nonetheless, by providing many services such as free healthcare and free education, giving subsidies for businesses, roads and streets paving, all that and more shows features of social type of economy system. By having features of market economy and some of the other type of economy one might be confused to determine the type of economy at KRG, however it can be called a mixed economy.
Criticism
There are some points if addressed by KRG and worked upon it would create a positive change in Kurdistan Region economy. I think it is recommended for the government to seriously take the few points below into consideration to enhance the economic situation in Kurdistan and a more clear and explicit vision of Kurdistan economy.
KRG and Society
Kurdistan Region before 1992 was under influence and control of Iraqi government which was under Saddam Baa’th dictatorial regime. To fully comprehend Kurdistan current economy there is a need to have pre-autonomy history in context. After 1958 revolution in Iraq, more specifically with Saddam taking power, Baa’th regime was leaning towards neo-Marxism aiming for having USSR’s support to help Iraq boost its economy after nationalizing the major oil producing company in the country, Iraq Petroleum Company (IPC) in early 1970s. That was followed by a huge increase in oil production, from 219 million ID in 1972 to 8.9 billion ID in 1980, by over 40 times in one decade. (Farouk-Sluglett & Sluglett, 1990). That happened with Russia’s help after signing a treaty with Iraq to buy some oil from them. The government used a big amount of its oil revenues for infrastructure, providing many public services for the people, subsidizing water, electricity and oil for the people, increasing the GDP and raising the rate of employment, as well as boosting the rest of economy, while enjoying the extra easy coming money from oil and gas revenues. (Farouk-Sluglett & Sluglett, 1990) Hence, the country was being more on the left side of the economic/political spectrum, meaning it was socialist economy. That played a big role in shaping the Iraqi people, including the Kurds, mentality, desires and wishes, creating a society that is laid back and dependent on the state in providing many social services and public services as well as waiting for the state to provide solutions for problems in the market and economy such as unemployment.
Another problem that is related to KRG and has big influence over economic situation is under-representation of women in economic realm, although that they constitute about half of the society. If women were more involved in the market and played a role as business owners and investors then it will make a big shift in the economy for that they have ability and opportunity to play a big role. In an interview with Ferda Jamil she said she has data that shows women own more than %50 of lands in Kurdistan, however they are not the decision makers or the ones in control to what happen to their property (Jamil, 2014). She with Suzan Aref started an association for businesswomen in Kurdistan to encourage women to be more involved as business owners and decision makers in the market, according to them, KRG has encouraged their initiative of creating this association. (Kurdish Businesswomen Establish Association, 2012)
KRG and Economy
According to the previously mentioned details, it can be said that KRI does not seem to have a clear vision when it comes to its type of economy. Hasan Kawa in his article criticizes Kurdistan Region economy system (Hasan, 2010). He says although the region is going through economic growth and that is something we cannot deny, but this growth will not be sustainable for lack of serious economic planning including long term planning. He said there is a lack of long term economic investments and there should be a care and attention for basic fundamentals of a good stable economy with consistent growth asking the government to look at examples from foreign countries who have a close historical nature to Kurdistan Region’s one. He also recommended creating research centers specifically to work on economy planning to enhance and improve the economic situation (Hasan, 2010)
Conclusion
Although Kurdistan Region of Iraq is relatively newly born region that found itself for the first time self-ruling itself with not much previous experience as it is a little over 2 decades old. In this essay I tried to highlight the main features of Kurdistan Region economy type by looking at the constitution, and investment law, as well as other examples. I came up with the conclusion that Kurdistan has a mixed economy with features from both free market economy and social economy. Taking into consideration that KRG is relatively a newly established government, it should not be viewed as negative thing that KRG shows uncertainty or lack of planning when it comes to political economy. However, it is necessary to keep working on making plans and showing more certainty to the people. That will insure continuous economic prosperity and growth which will be good for everyone in the region.
