Bloated public salaries at heart of Iraq’s economic woes

Bloated public salaries at heart of Iraq’s economic woes
A woman street vendor waits for customers in Basra. Iraq faces a liquidity crisis as the cash-strapped state struggles to pay public sector salaries and import essential goods while oil prices remain low. (AP)
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Updated 24 October 2020

Bloated public salaries at heart of Iraq’s economic woes

Bloated public salaries at heart of Iraq’s economic woes
  • The government has outlined a vision for a drastic overhaul of Iraq’s economy in a “white paper” presented last week to lawmakers and political factions

Long-time Iraqi civil servant Qusay Abdul-Amma panicked when his monthly salary was delayed. Days of waiting turned to weeks. He defaulted on rent and other bills.
A graphic designer for the Health Ministry, he uses about half his salary to pay his rent of nearly 450,000 Iraqi dinars a month, roughly $400. If he fails to pay twice in a row, his landlord will evict him and his family, he fears. “These delays affect my ability to survive,” Abdul-Amma said.
Iraq’s government is struggling to pay the salaries of the ever-swelling ranks of public sector employees amid an unprecedented liquidity crisis caused by low oil prices. September’s salaries were delayed for weeks, and October’s still haven’t been paid as the government tries to borrow once again from Iraq’s currency reserves. The crisis has fueled fears of instability ahead of mass demonstrations this week.
The government has outlined a vision for a drastic overhaul of Iraq’s economy in a “white paper” presented last week to lawmakers and political factions. But with early elections on the horizon, the prime minister’s advisers fear there is little political will to execute it fully.
“We are asking the same people we are protesting against and criticizing to reform the system,” said Sajad Jiyad, an Iraq researcher.
The white paper’s calls for cutting public sector payrolls and reforming state finances would undermine the patronage systems that the political elite have used to entrench their power.
A major part of that patronage is handing out state jobs in return for support. The result has been a threefold increase in public workers since 2004. The government pays 400 percent more in salaries than it did 15 years ago. Around three quarters of the state’s expenditures in 2020 go to paying for the public sector — a massive drain on dwindling finances.
“Now the situation is very dangerous,” said Mohammed Al-Daraji, a lawmaker on parliament’s Finance Committee.
One government official said political factions are in denial that change is needed, believing oil prices will rise and “we will be fine.”
“We won’t be fine. The system is unsustainable and sooner or later it will implode,” the official said, speaking on condition of anonymity to discuss internal politics.
Iraq’s activists have called for a march on Oct. 25, expected to draw large crowds, a year since massive anti-government protests first brought tens of thousands to the streets demanded reforms and an end to the corrupt political class.

FASTFACT

The Iraq government pays 400 percent more in salaries than it did 15 years ago.

“As far as meeting our demands, there have been no changes,” said Kamal Jabar, member of the Tishreen Democratic Movement, founded during the protests last year. “To us, the white paper is a joke.”
Abu Ali, a merchant in Baghdad’s commercial district of Shorjah, fears what the following months have in store. The state is the primary source of employment for Iraqis, and civil servants are the lifeblood of his business.
“The delays in salary payments have affected the market directly,” he said. “If these delays continue our business and the economy will collapse.”
Abdul-Amma’s September pay was 45 days late, and he still hasn’t received the October pay that was supposed to come on the first of the month. He worries about the coming months as well.
“I have a history of chronic heart disease, and one of my daughters is also sick,” said the father of four. He pays $100 in medical fees per month.
But to the architects of the reform paper, he is part of the problem: Public sector bloat is first in line for reform.
“We hope the civil service and bureaucracy will recognize a need for change,” Finance Minister Ali Allawi said in a recent interview.
Iraq relies on oil exports to fund 90 percent of state revenues. Those revenues have plunged to an average $3.5 billion a month since oil prices crashed earlier this year.
That’s half the $7 billion a month needed to pay urgent expenses. Of that, $5 billion is for public sector salaries and pensions, according to Finance Ministry figures. Iraq also imports nearly all of its food and medicine; with foreign currency reserves at $53 billion, the World Bank estimates the country can sustain these imports for another nine months. Foreign debts account for another $316 million.
Poor productivity of public workers is the heart of the issue, Allawi said.
“We’ve ended up with a low productivity, high-cost public sector that doesn’t really earn its keep,” he said. “In one way or another this issue has to be tackled by either reducing numbers, which is politically difficult, reducing salaries ... or increasing productivity.”
The white paper calls for public sector payments to be reduced from 25 percent of GDP to 12 percent but doesn’t detail how. Officials said one step may be to restore taxes on civil servants’ benefits that previous administrations had lifted.
To meet month-to-month commitments now, the government has had to borrow internally from its foreign currency reserves. A request of a second loan of $35 billion was sent to parliament, drawing criticism from lawmakers.
Haitham Al-Jibouri, head of parliament’s Finance Committee, said in televised remarks that if borrowing was the government’s only plan he would fetch a shopkeeper from Bab Al-Sharqi, a commercial area in the capital, to do the finance minister’s job.


Erdogan replaces Turkish trade minister, forms two new ministries

Erdogan replaces Turkish trade minister, forms two new ministries
Updated 29 min 26 sec ago

Erdogan replaces Turkish trade minister, forms two new ministries

Erdogan replaces Turkish trade minister, forms two new ministries
  • In a presidential decree Ruhsar Pekcan was replaced as trade minister by Mus, who has been a lawmaker for Erdogan’s AK Party since 2011

ISTANBUL: President Tayyip Erdogan appointed a prominent member of Turkey’s ruling AK Party, Mehmet Mus, as trade minister on Wednesday and split the Family, Labour and Social Policies Ministry into two ministries.
In a presidential decree Ruhsar Pekcan was replaced as trade minister by Mus, who has been a lawmaker for Erdogan’s AK Party since 2011 and served as the party’s deputy chairman in charge of the economy.
The decree, published in the Official Gazette, gave no reason for the change, but it comes after opposition politicians accused Pekcan’s ministry of buying supplies from her family-owned company and called on her to resign.
The Trade Ministry confirmed that the purchase of sanitisers had been made, but said in a statement on Tuesday the choice was based on price alone and not due to “the name of the company making the sale.”
It said that the sale, worth some 500,000 lira ($62,000), had been carried out in line with relevant regulations.
Erdogan’s overnight changes come amid speculation over a wider cabinet reshuffle, after he changed the country’s top economic management in November, including the central bank governor.
The president established two new ministries by splitting the Family, Labour and Social Policies Ministry into two separate ministries, according to the decree.
He appointed Derya Yanik as Family and Social Policies Minister and Vedat Bilgin as the Labour and Social Security Minister, replacing Zehra Zumrut Selcuk.


Saudi Arabia to raise $800m from privatization of two flour mills.

Saudi Arabia to raise $800m from privatization of two flour mills.
Updated 21 April 2021

Saudi Arabia to raise $800m from privatization of two flour mills.

Saudi Arabia to raise $800m from privatization of two flour mills.
  • The National Center for Privatization & PPP (NCP) said it completed the sale of the two mills (MC2 and MC4) to private sector investors

DUBAI: Saudi Arabia is set to generate about SR3 billion ($800 million) in proceeds from the privatization of two flour mills.
The National Center for Privatization & PPP (NCP) said it completed the sale of the two mills (MC2 and MC4) to private sector investors.
A consortium that includes Abdulaziz Alajlan & Sons Company for Commercial and Real Estate Investment, Al Rajhi International for Investment, National Agricultural Development and OLAM International acquires the second milling company (MC2) for about SR2.14 billion, according to a stock exchange filing on Wednesday.
Meanwhile a consortium that includes Abdullah Al-Othaim Markets Company, Allana International Company and United Feed Manufacturing Company secured the fourth milling company for SR859 million.
Saudi Arabia is accelerating plans to privatize key infrastructure in an effort to modernize the economy, speed major infrastructure works and develop its financial services sector.


AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?

AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?
Updated 21 April 2021

AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?

AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?
  • Good news for Apple fans in the Gulf – all the new products will be available in the region as early as the end of April

DUBAI: Apple just held its first keynote event of the year – announcing new products such as a button-like accessory to help people keep track of their belongings, as well as updates for existing models including a purple iPhone 12.
Good news for Apple fans in the Gulf – all the new products will be available in the region as early as the end of April.
Here are the new products launched during the Apple event in its Cupertino headquarters, and their prices and availability status in the UAE:

AirTag
Price: Starting 129 dirhams
Availability: Pre-order starts on April 23; product is available on April 30


24-inch iMac (available in seven different colors)
Price: Starting 5,499 dirhams
Availability: Pre-order starts on April 30; product is available in the second half of May

Apple TV 4K
Price: Starting 729 dirhams
Availability: Pre-order starts on April 30; product is available in the second half of May

iPad Pro with M1 chip
Price: Starting 3,199 dirhams
Availability: Pre-order starts on April 30; product is available in the second half of May

Other announcements:
The new purple iPhone 12 has no other updates other than the color – it will be the same price as the other iPhone 12 models.
The new iOS 14.5 will be launched next week. It comes with the biggest privacy changes Apple will introduce so far, according to a statement.


More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu
Updated 21 April 2021

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu
  • The Kingdom has stepped up efforts to secure more jobs for its citizens in line with similar localization efforts underway elsewhere in the region

RIYADH: The Royal Commission for Jubail and Yanbu (RCJY) has advertised 96 jobs for Saudis on its website, in Riyadh, Jazan, Jubail and Yanbu.
They cover administrative, engineering and health roles.
Among the advertised positions are a financial planning specialist, director of transportation and equipment department, director of buildings department, and director of public facilities department.
The Kingdom has stepped up efforts to secure more jobs for its citizens in line with similar localization efforts underway elsewhere in the region.
The Royal Commission for Jubail and Yanbu (RCJY) was established by royal order in 1975 to kickstart the Kingdom’s petrochemicals industry.


WH Smith to open at King Abdulaziz International Airport in Jeddah

WH Smith to open at King Abdulaziz International Airport in Jeddah
Updated 21 April 2021

WH Smith to open at King Abdulaziz International Airport in Jeddah

WH Smith to open at King Abdulaziz International Airport in Jeddah
  • Airport retail may rebound on travel resumption
  • Pandemic culls names across retail sector

DUBAI: British retailer WH Smith is coming to King Abdulaziz International Airport in Jeddah.
Tihama Advertising, Public Relations and Marketing Company has agreed a deal with the General Authority of Civil Aviation to lease two units at the airport, it said in a Saudi stock exchange filing.
Tihama Education, a unit of the Tadawul-listed company, will operate two outlets under the WH Smith brand franchise, covering arrivals and departures.
Tihama has an existing partnership with WH Smith at Riyadh Airport and in the UAE.
WH smith did not respond to a request for comment.
Founded in 1792, WH Smith is one of the oldest names on the British high street and has also become one of the world’s leading travel retailers operating over 1,100 stores in 31 countries.
Retailers have suffered from the impact of more than a year of intermittent lockdowns worldwide but the transport-focused end of the retail business may stand to benefit from a resumption of international air travel.
Analysts at RBC upgraded WH Smith to ‘outperform’ from ‘sector perform’ last week and lifted their price target on the stock to 2,200p from 2,100p.